TIDMORPH
RNS Number : 1725C
Open Orphan PLC
17 June 2021
This announcement contains inside information
for the purposes of Article 7 of Regulation (EU) No 596/2014 as
it forms part of UK law
by virtue of the European Union (Withdrawal) Act 2018
("MAR")
OPEN ORPHAN PLC
("Open Orphan" or the "Company")
Final Results to 31 December 2020
Important year of transition following the various merger and
acquisition activities in 2019 and January 2020
Open Orphan (AIM: ORPH), a rapidly growing specialist
pharmaceutical services clinical research organisation (CRO) and a
world leader in vaccine and antiviral testing using human challenge
clinical trials, announces its audited results for the 12 months to
31 December 2020. Following the acquisition of hVIVO in January of
last year, 2020 was a year of transition for the Company with
management integrating both businesses and driving improvements in
revenue, gross margin and efficient overheads.
This culminated in Q4 2020 proving to be an inflection point for
the Company as it successfully generated both an operating profit
and positive cashflow. In addition, the Company ended the year with
a strong order book of contracted revenue which has been the
foundation for the Company's very strong start to 2021. In the
context of the rapidly evolving COVID-19 pandemic and broader
growth of the global infectious disease market, this should
translate into very strong growth opportunities for the Company
going forward.
Operational highlights:
-- Integration of hVIVO and Venn Life Sciences completed with
pharmaceutical services business now profitable and poised for
strong revenue and EBITDA growth in 2021; growing working capital
balance on hand
-- Clearly established as the world leader in the testing of
vaccines and antivirals through the use of human challenge study
clinical trials
-- Strategy in place to maximise shareholder value via the
demerger of non-core assets with first spin-out Poolbeg Pharma Ltd
well under way
-- In the last 12 months substantially increased the number of
quarantine beds available to Open Orphan:
-- Original 24 quarantine beds in Queen Mary's BioEnterprises
Centre (QMB) in Whitechapel
-- 19 bed additional beds through the conversion of the
Whitechapel Hotel
-- Open Orphan has the capacity to screen in >500 volunteers
per week to support a growing pipeline of human challenge
studies.
-- New state-of-the-art volunteer recruitment screening centre
on the ground floor of QMB
-- New standalone regional volunteer recruitment screening
centre in Manchester
-- Strategic decision In March 2020 to develop a COVID-19 challenge model:
-- hVIVO was uniquely placed to contribute to a world-first
initiative led by the UK government to work as part of the Vaccine
Task Force's Human Challenge project to manufacture a COVID-19
virus, and to collaborate on the design and delivery of a
characterization study to understand how to use this virus for
vaccine and anti-viral challenge trials, which is ongoing.
-- Collaboration is ongoing with significant progress achieved
to enable the Group to test vaccines and therapeutics against
COVID-19 in the near future.
Financial highlights
Open Orphan hVIVO Ltd Open Orphan Open Orphan Open Orphan
plc Group (Proforma plc DAC plc Group
(Results as results on (formerly (Proforma (Proforma
Reported) a stand-alone Venn Life results on results on
basis for Sciences Holdings a stand-alone a combined
a full year) plc - Proforma basis for basis for
results on a full year) a full year)
a stand-alone
basis for
a full year)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Income GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Statement
Revenue
(Incl.
other
income) 21,995 3,543 14,515 15,092 7,844 8,643 - - 22,359 23,735
Operating
(Loss) (10,442) (5,130) (4,854) (5,893) (5,604) (6,385) (435) (669) (10,893) (12,948)
--------- -------- -------- -------- --------- --------- -------- -------- --------- ---------
EBITDA before
exceptional
items (6,265) (3,792) (2,925) (3,785) (3,313) (4,432) (431) (668) (6,669) (8,885)
Loss for
period (10,791) (5,739) (4,927) (6,973) (5,776) (6,622) (548) (899) (11,251) (14,494)
--------- -------- -------- -------- --------- --------- -------- -------- --------- ---------
-- An important year of transition to reverse the proforma
losses in 2019 by strengthening business development, restructuring
underperforming businesses, driving cross group synergies,
eliminating unnecessary layers of management, and integrating
support functions across the Group.
-- Significantly improved track record of major contract wins in
2020 (versus 2019) setting the scene for strong revenue growth in
2021
-- Turnaround on track evidenced by an operating profit
delivered for Q4 2020 and targeting full year profitability in
2021
-- Cashflow positive in Q4 2020 driven by advanced cash payments on major agreements.
-- Pharmaceutical services business (the combined business of
Venn and hVIVO) is operationally profitable and moving into cash
generation.
-- Well capitalized following two placings raising a combined
total of GBP17.9m (before expenses)
-- Cash and cash equivalents of GBP15.1m as at 31 May 2021
-- Proforma revenues of GBP22.4m (2019: GBP23.7m), with losses
reduced to GBP11.3m (2019: GBP14.5m)
-- Reported revenues of GBP22.0m (2019: GBP3.5m), with a
reported loss for the period of GBP10.8m (2019: GBP5.7m)
Outlook:
-- Clinical Science Teams and Laboratory Development Teams
continue to address ground-breaking research projects with major
pharmaceutical players - strong demand for services expected.
-- Planned demerger strategy is progressing well with further
update provided today on Poolbeg Pharma
-- Demergers offer an excellent opportunity for shareholders to
maximise value through separate shareholdings in a profitable
pharma services company as well as exciting pharma products
commercialisation companies.
-- Opportunity to progress Disease in Motion(R) platform.
-- Targeting delivery of full year profit in 2021 - focusing on enhancing profits and earnings
Cathal Friel, Executive Chairman of Open Orphan plc commented:
"The Group is not simply satisfied to have returned to a positive
operating position at the end of 2020 and to be targeting to
deliver a full year profit in 2021, it is now focused to further
enhance the quality of profits and earnings of the Group going
forward. Therefore, notwithstanding the strategic investments we
are making in new challenge models and the Disease in Motion(R)
platform, we will relentlessly focus on cross selling our services
across our broad client base, leveraging technology to drive
improved efficiencies, and stripping away unnecessary cost in our
operations."
"It has been a remarkable year and I am grateful to our team for
their hard work and loyalty. I am also grateful to you, our
shareholders for the faith you have placed in the Group. The new
financial year has started well and is already very well advanced.
We are confident that the actions we are taking now to drive our
core CRO business and monetise non-core assets should create
significant value for all our stakeholders."
The Company's Annual Report and Accounts for the year ended 31
December 2020 will be posted to shareholders in due course together
with the notice of the 2021 Annual General Meeting], and will be
available on the Company's website, https://www.openorphan.com/
Analyst Briefing
An online briefing for Analysts will be hosted by Cathal Friel,
Executive Chairman, and Leo Toole, Group Financial Officer, at
11.00am on Thursday 17 June 2021 to review the results and
prospects. Analysts wishing to attend should contact Walbrook PR on
openorphan@walbrookpr.com or on 020 7933 8780.
Investor presentation
OPEN ORPHAN PLC is pleased to announce that Cathal Friel and Leo
Toole will also provide a live presentation relating to Final
Results 2020 via the Investor Meet Company platform on 17th Jun
2021 at 6:00pm BST.
The presentation is open to all existing and potential
shareholders.
Investors can sign up to Investor Meet Company for free and add
to meet OPEN ORPHAN PLC via:
https://www.investormeetcompany.com/open-orphan-plc/register-investor
Investors who already follow OPEN ORPHAN PLC on the Investor
Meet Company platform will automatically be invited.
For further information please contact:
Open Orphan plc +353 (0) 1 644 0007
Cathal Friel, Executive Chairman
Arden Partners plc (Nominated Adviser
and Joint Broker) +44 (0) 20 7614 5900
John Llewellyn-Lloyd / Richard Johnson
/ Oscair McGrath
finnCap plc (Joint Broker) +44 (0) 20 7220 0500
Geoff Nash / James Thompson/ Richard
Chambers
Davy (Euronext Growth Adviser and Joint
Broker) +353 (0) 1 679 6363
Anthony Farrell
Walbrook PR (Financial PR & IR) +44 (0)20 7933 8780 or openorphan@walbrookpr.com
Paul McManus / Louis Ashe-Jepson +44 (0)7980 541 893 / 07747 515 393
/ Sam Allen / 07502 558 258
Notes to Editors
Open Orphan plc (London and Euronext: ORPH) is a rapidly growing
pharmaceutical service/contract research company that is a world
leader in testing vaccines and antivirals using human challenge
clinical trials. The company provides services to Big Pharma,
biotech and government/public health organisations.
Open Orphan runs challenge studies in London from both its
19-bedroom Whitechapel quarantine clinic, opened in February 2021,
and its 24-bedroom QMB clinic which also has a highly specialised
virology and immunology laboratory on-site. Open Orphan has a
leading portfolio of eight human challenge study models for
conditions such as RSV, flu, asthma and COPD. In addition, Open
Orphan is also developing the world's first COVID-19 human
challenge study model as part of the Human Challenge Programme and
has signed a reservation contract with the UK Government for the
first three COVID-19 vaccine challenge studies.
Building upon its many years of challenge studies and virology
research, the Company is developing an in-depth database of
infectious disease progression data. Based on the Company's Disease
in Motion(R) platform, this unique dataset includes clinical,
immunological, virological and digital (wearable) biomarkers. The
Disease in Motion platform has many potential applications across a
wide variety of end users including big technology, wearables,
pharma and biotech companies. Following COVID-19 there is now a
renewed interest and investment in infectious diseases.
Open Orphan's Paris office has been providing biometry, data
management and statistics to its many European pharmaceutical
clients for over 20 years. For over 15 years, the Company's
Netherlands office has been providing drug development consultancy
and services, including CMC (chemistry, manufacturing and
controls), PK and medical writing, to a broad range of European
clients. Both offices are now also fully integrated with the London
office and working on challenge study contracts as well as
supporting third party trial contracts.
Executive Chairman's Statement
For the year ended 31 December 2020
Dear Shareholder,
I am very happy to report to you on the progress made in 2020.
Having completed the integration of both hVIVO plc with our
existing Venn Life Sciences plc and Open Orphan operations, we now
have a fully integrated services business with its main office and
business based out of Whitechapel in East London, supported by our
drug development consultancy arm in Breda, in the Netherlands and
in Paris in France. During this restructuring and integration
process we have reduced the footprint of offices that we had in
January 2020 from eight to now four. We have worked hard to
establish Open Orphan as the world leader in the testing of
vaccines and antivirals through the use of human challenge study
clinical trials. Furthermore, most importantly we are pleased to
confirm that after many years of losses racked up by Venn and hVIVO
the combined business is now operationally profitable and,
furthermore, as we move through 2021 is generating cash. It has
always been our opinion that such pharma services businesses should
always be profitable and going into a future that looks bright we
are steadfast in our belief that this unique business will remain
fast growing and profitable.
Looking forward to 2021, we are very happy with the progress and
we have set ourselves demanding goals and targets for the year and
we hope to exceed them significantly on all counts. Most
importantly as we progress, we increasingly target H1 of 2021 for
the Company as a whole to be operationally profitable and are
trading well to meet market forecasts. Furthermore, we have been
guiding the market that our strategy to spin out non-core assets is
well on the way to being monetized and the proceeds from these
returned to shareholders via distributions in species by the end of
2021. The strategy, described in more detail below, is progressing
well having successfully completed a Reduction of Capital earlier
this year.
Non-core asset monetisations
Earlier this week we announced further details of our plans for
a first distribution in specie, in relation to the demerging of
certain non-core assets, which we own 100%. These assets had
resided within Open Orphan and are in the process of being spun out
into Poolbeg Pharma Limited ("Poolbeg Pharma"), a company
established to develop these assets. In the coming weeks we expect
Poolbeg Pharma to complete its own IPO on the AIM market of the
London Stock Exchange., where it will become its own standalone
company. For avoidance of doubt, these non-core assets do not
include the 49% stake we hold in Imutex nor the 62.62% held in Prep
Biopharm, nor do they include our Disease in Motion data business.
We are very excited about the value we can return to shareholders
with this first non-core asset spin out and monetisation and, if it
grows in the same trajectory as Open Orphan has in the last two
years, then it will be a positive start to our non-core
monetisation strategy. Over the coming few months we would hope to
further update the market on progress with the monetisation of the
second non-core asset and we will have continued progress the spin
out and monetisation of all non-core assets.
Business update
In the last 12 months we have substantially increased the number
of quarantine beds that we have access to. We have grown from the
original 24 quarantine beds we have had in our Queen Mary's
BioEnterprises Centre (QMB) in Whitechapel in East London, by
adding 19 bed additional beds through the conversion of the
Whitechapel Hotel into the Whitechapel Clinic. We have also
expanded our volunteer recruitment facilities by converting a
former Costa Coffee shop that was on the ground floor of our QMB
facility into a state-of-the-art volunteer recruitment screening
centre. On top of that, we also opened a standalone regional
volunteer recruitment screening centre in Manchester. With these
new facilities we now have the ability to screen in excess of 500
volunteers per week to facilitate our growing pipeline of human
challenge studies.
Since January 2020 we have also substantially increased our
number of challenge study models. Previously hVIVO would have been
very focused around one disease indication and in recent years very
dependent on RSV challenge studies. However, in the past year I am
glad to report that hVIVO, which is now home to our main London
offices, offers a much broader suite of human challenge study
models which can now test vaccines and antivirals for influenza,
RSV, RV, COVID-19, asthma, malaria, hRV, COPD, and a number of
other diseases.
Post pandemic, there has been an explosion in the growth of the
infectious disease pharmaceuticals market, which is estimated to
grow to in excess of $250bn by 2025. As major pharmaceutical
companies develop a range of new infectious disease vaccines and
antivirals, many of them can be tested using a human challenge
model. As such, we believe that Open Orphan is very well positioned
in a rapidly growing market and we can see a growing pipeline of
contracts. We are actively engaging with a large number of the top
pharma companies around the world as regards testing their
products
With the pharmaceutical services business (Venn & hVIVO
combined) now firmly profitable and cash generative we have a
growing working capital balance on hand, which is a very favourable
situation to be in after so many years of consistent losses. As
part of putting Poolbeg Pharma on a firm footing to IPO
successfully, and hopefully grow substantially in the months and
years ahead, we are using some of our cash balance (c GBP0.2m)
toward Poolbeg Pharma. Furthermore, we are investing a further
GBP0.2m in developing our other non-core assets as part of ensuring
that they too will hopefully be monetised in due course ahead.
Governance
The Board continues to recognise the importance of the high
standards of corporate governance and considers that the Group's
success is enhanced by the imposition of a strong corporate
governance framework. Accordingly, in recognition of the need to
maintain continued best practice the Board will continue to monitor
its composition and skills balance.
In November 2020, I was very happy to welcome Elaine Sullivan to
the Board who brings many years of experience in pharma and life
sciences to support our strategy. In return, I would also like to
acknowledge the important contribution of Mark Warne during his
tenure as non-executive director and wish him well for the
future.
2020 in perspective
The calendar year just gone was an important year of transition
following the various merger and acquisition activities in 2019 and
January 2020. The Company has focused its attention to reverse the
negative combined loss position in 2019 by strengthening business
development capability and systems, restructuring underperforming
businesses, eliminating unnecessary layers of management, and
integrating support functions across the Group. This work is now
complete with our focus on driving ongoing steady performance
improvements in revenue, gross margins and efficient overheads.
Our work to strengthen business development is coming to
fruition as we see a significantly improved track record of major
contract wins in 2020 (versus 2019). This sets the scene for strong
revenue growth in 2021 and in turn strong EBITDA and operating
profit growth.
In light of the emerging COVID-19 pandemic in March 2020 the
Group took the strategic decision to develop a COVID-19 challenge
model. On the back of this investment, the Open Orphan group
(through its hVIVO Division) was commissioned by the UK Government
to contribute to a world-first initiative led by the UK government
to manufacture a COVID-19 virus, and collaborate to design and
deliver a characterization study to understand how to use this
virus for vaccine and anti-viral challenge trials. This
collaboration is ongoing with significant progress achieved to
enable the Group to test vaccines and therapeutics against COVID-19
in the near future.
Financial Results
While nobody can be happy that the Group made a loss in 2020,
this was expected and importantly shows significant improvement
versus the pro forma performance of the Group in 2019. In addition,
the Group made an operating profit in Q4 2020 and targets continued
momentum to deliver full year profitability in 2021. As mentioned
above the pharmaceutical services business (the combined business
of Venn and hVIVO) is now operationally profitable and as we move
into 2021 will be cash generative.
The Group is very well capitalised and was strengthened through
two placings in 2020 raising a combined total of GBP17.9m (before
expenses) and strong working capital management through advanced
cash payments on major agreements. As at 31 December 2020 cash and
cash equivalents were GBP19.2m. Cash as of end May was GBP15.1m,
reflecting the expected release of customer prepayments in H1 2021,
which should build back strongly by year end as we close contracts
for execution in 2022
Reported results for Open Orphan plc are summarized on page 4
and are covered by the schedules and notes from pages 28 to 63 of
these Financial Statements (and in particular reflect reverse
merger accounting treatment under IFRS 3 and IFRS 10 of the
combination of Venn Life Sciences Holdings plc and Open Orphan DAC
as of 28 June 2019).
Proforma Results for hVIVO Ltd (on a stand-alone basis) are
presented for reference. In addition, pro-forma results for Open
Orphan plc (formerly Venn Life Sciences Holdings plc on a
stand-alone basis), Open Orphan DAC (on a stand-alone basis) and
Open Orphan plc (on a combined basis) for the full calendar year
are outlined for reference.
Open Orphan hVIVO Ltd Open Orphan Open Orphan Open Orphan
plc Group (Proforma plc DAC plc Group
(Results as results on (formerly (Proforma (Proforma results
Reported) a stand-alone Venn Life results on on a combined
basis for Sciences Holdings a stand-alone basis for a
a full year) plc - Proforma basis for full year)
results on a full year)
a stand-alone
basis for
a full year)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Income GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Statement
Revenue
(Incl.
other
income) 21,995 3,543 14,515 15,092 7,844 8,643 - - 22,359 23,735
Project &
Admin Costs (32,437) (8,673) (19,369) (20,985) (13,448) (15,028) (435) (669) (33,252) (36,683)
--------- -------- --------- --------- --------- --------- -------- -------- --------- ---------
Operating
(Loss) (10,442) (5,130) (4,854) (5,893) (5,604) (6,385) (435) (669) (10,893) (12,948)
--------- -------- --------- --------- --------- --------- -------- -------- --------- ---------
EBITDA
before
exceptional
items (6,265) (3,792) (2,925) (3,785) (3,313) (4,432) (431) (668) (6,669) (8,885)
Operating
(Loss)
before
exceptional
items (8,317) (4,419) (4,377) (4,845) (3,957) (5,674) (435) (669) (8,769) (11,188)
--------- -------- --------- --------- --------- --------- -------- -------- --------- ---------
Loss for
period (10,791) (5,739) (4,927) (6,973) (5,776) (6,622) (548) (899) (11,251) (14,494)
--------- -------- --------- --------- --------- --------- -------- -------- --------- ---------
Balance GBP'000 GBP'000
Sheet
Non-current
Assets 18,501 4,376
Current
Assets 10,839 3,627
Cash 19,205 1,037
--------- --------
Total Asset 48,545 9,040
--------- --------
Total equity 22,297 2,850
--------- --------
Non-current
Liabilities 2,216 1,025
Current
Liabilities 24,032 5,165
--------- --------
Total
Liabilities 26,248 6,190
--------- --------
Total Equity
&
Liabilities 48,545 9,040
--------- --------
Strategy
Open Orphan plc is a rapidly growing specialist pharmaceutical
services clinical research organisation (CRO) and world leader in
vaccine and antiviral testing using human challenge clinical trials
. Our enlarged offering of early clinical development services,
clinical trial delivery expertise and virology related challenge
studies, with a particular focus on rare and emerging diseases, is
a strong platform to deliver substantial and sustainable returns to
shareholders. To enable our pathway to sustainable revenue and
earnings growth, we have focussed on the following key initiatives
which we are confident will bear fruit across 2021 and into
2022.
-- Expanding our challenge business in London beyond Influenza
and Respiratory Syncytial Virus (RSV) through the development of
new models in the areas of Malaria and Pneumococcus, which are
already in advanced stages of validation and are targeted to
commercialize in 2022.
-- Strengthening our capability to deliver for clients through
the opening of the Whitechapel Clinic as an extension of hVIVO`s
current QMB site. This newly renovated, state-of-the-art unit
allows us to increase our study capacity substantially in the year
ahead.
-- Building our capability in the Netherlands to provide deep
expertise in the areas of early drug development and CMC for
early-stage drug assets. In parallel, we will leverage the
considerable strength of our in-house data management,
biostatistics, randomization, and medical writing teams in France
to drive internal cost synergies for London sourced challenge
projects.
-- Ongoing focus to strengthen and optimize gross margins and
EBITDA margins to 15-20% of Revenue by driving improved load
balancing and capacity utilization across our quarantine units,
leveraging technology to improve operational throughput, and
driving full revenue recovery for billable time across all service
lines. In addition, we are renegotiating operating leases to
optimize rental costs in light of our core operational footprint
and evolving post pandemic work practices.
-- Taking enabling steps to accelerate the development and
commercialisation of some of our non-core Development IP Assets
through the demerger of Poolbeg Pharma, the detailed timetable
which was announced earlier this week and which offers the
opportunity to access financing as a separate public company listed
on AIM and a separate business focussed on the successful
commercialisation of pharmaceutical products. In addition, we
continue to carefully monitor the progress of our associates (49%
share in Imutex Limited, developing vaccines against influenza (FLU
v) and universal mosquito borne diseases (AGS v), 62.62% of PrEP
Biopharm Limited focused on the prevention of respiratory
infections).
-- Leveraging technology through our Disease in Motion(R)
platform, a unique data-focused platform which includes clinical,
immunological, virological, and digital (wearable) biomarkers with
multiple infectious disease applications that are applicable to a
wide variety of end users including big tech, wearables, pharma,
and biotech companies. In H2 2021, we will consider the opportunity
to spin-out the Disease in Motion* platform building on our
progress with Poolbeg Pharma.
Outlook
Over the last year we have been busy transforming Open Orphan
into a profitable enterprise with a world leading position testing
vaccines and antivirals using human challenge studies. This work
continues apace as we anticipate that the testing of vaccines and
antivirals for multiple diseases will increasingly become part of
mainstream clinical research offerings given the historic low
levels of such research to address known virus risks and potential
virus risks, a fact highlighted in the starkest possible terms by
the advent of the COVID-19 pandemic.
We are satisfied that, proactively, we took the lead to develop
a COVID-19 challenge model in March 2020 as it was clear to us that
such research would be essential. Indeed, this investment has been
vindicated by our partnership with the UK government to
characterize a COVID-19 virus in anticipation of using it to test
vaccines and therapeutics in the coming years. Through this and
other collaborations, the recognition of the amazing capability in
our teams is humbling, and this has contributed to increased
awareness of Open Orphan and its respective hVIVO and Venn
divisions.
Our Clinical Science Teams and Laboratory Development Teams
continue to address ground-breaking research projects with major
pharmaceutical players, and their exceptional expertise, combined
with a problem-solving mindset, to address our Clients' needs means
that we expect our services to be in strong demand for the year
ahead.
I have always made it very clear that the clinical research
services business needs to stand on its own as a sustainable and
profitable business. As that journey is now well advanced, it means
that this is the right time to bifurcate this service businesses
from the pharmaceutical development assets that will prosper with a
management and environment focused on the rapid development of new
therapies and the ability to be tailored to its different funding
needs. Our planned demerger strategy is progressing well having
successfully completed a Reduction of Capital in our parent company
Open Orphan plc. Should we succeed to complete the demergers, this
will be an excellent opportunity for shareholders in Open Orphan to
maximise value through separate shareholdings in both a profitable
pharma services company as well as exciting pharma products
commercialisation companies.
In this vein, we are very excited by the opportunity to progress
our Disease in Motion(R) platform. The platform includes data from
cutting edge wearables that are applicable to a wide variety of end
users including big tech, wearables, pharma, and biotech companies.
As volunteers remain under close observation prior to viral
challenge, during disease progression and through to full recovery,
data is captured across the full time-course of the infection,
yielding possible insights into the body's response to infection.
As a recognised global leader in supporting the development of
therapeutics and vaccines, our team of virological, clinical, and
regulatory experts are actively in discussion with potential
partners to help address the next set of challenges facing
humanity. In due course, we see the potential for this new activity
stream to be demerged from the core services business to again
create significant value through separate shareholdings.
Lastly, the Group is not simply satisfied to have returned to a
positive operating position at the end of 2020 and to be targeting
to deliver a full year profit in 2021, it is now focused to further
enhance the quality of profits and earnings of the Group going
forward. Therefore, notwithstanding the strategic investments we
are making in new challenge models and the Disease in Motion(R)
platform, we will relentlessly focus on cross selling our services
across our broad client base, leveraging technology to drive
improved efficiencies, and stripping away unnecessary cost in our
operations.
It has been a remarkable year and I am grateful to our team for
their hard work and loyalty. I am also grateful to you, our
shareholders for the faith you have placed in the Group. The new
financial year has started well and is already very promising, and
we look forward to creating significant value for all our
stakeholders
Cathal Friel - Executive Chairman
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Year to Year to
Notes 31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- ------------ ------------
Continuing operations
Revenue, from contracts with customers 5,35 20,602 3,372
Direct Project and Administrative
Costs 6 (32,437) (8,673)
Other operating income 33 1,393 171
Operating (loss) (10,442) (5,130)
---------------------------------------- ------------ ------------
Depreciation 6,16,37 (1,883) (296)
Amortisation 6,17 (169) (331)
Exceptional items 7 (2,125) (711)
EBITDA before exceptional items 5/6 (6,265) (3,792)
------------ ------------
Finance Expense 12 (374) (350)
Share Based Payment charge 32 (240) (102)
Loss on sale/impairment of Investments 18c/d - (224)
Share of loss of associate using
equity method 18b (107) -
---------------------------------------- -------- ------------ ------------
(Loss) before income tax (11,163) (5,806)
Income tax credit 13 372 67
---------------------------------------- -------- ------------ ------------
(Loss) for the year (10,791) (5,739)
---------------------------------------- -------- ------------ ------------
(Loss) for the year is attributable
to:
Owners of the parent (10,791) (5,739)
---------------------------------------- -------- ------------ ------------
Other comprehensive income
Currency translation differences 318 1,124
---------------------------------------- -------- ------------ ------------
Total comprehensive (loss) for
the year (10,473) (4,615)
---------------------------------------- -------- ------------ ------------
Earnings per share from continuing
operations
attributable to owners of the parent
during the year Note 2020 2019
Basic and diluted (loss) per ordinary
share
From continuing operations 14 (1.80p) (3.48p)
For the year (1.80p) (3.48p)
-------------------------------------------- ----- -------- --------
All activities relate to continuing operations.
.
Consolidated and Company's Statement of Financial Position
For the year ended 31 December 2020
Group Company
Group Company
2020 2019 2020 2019
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- -------- -------- ----------
Assets
Non-current assets
Intangible assets 17 6,127 2,875 - -
Property, plant and equipment 16 1,068 190 - -
Investment in associates 18b 7,076 - - -
Investments in subsidiaries 18a - - 22,334 8,195
Right of Use Asset 37 4,230 1,311 - -
Total non-current assets 18,501 4,376 22,334 8,195
------------------------------- ------- --------- -------- -------- ----------
Current assets
Inventories 20 953 - - -
Trade and other receivables 21 9,806 3,615 10,960 5,529
Current Tax recoverable 80 12 - -
Cash and cash equivalents 22 19,205 1,037 8,689 421
Total current assets 30,044 4,664 19,649 5,950
------------------------------- ------- --------- -------- -------- ----------
Total assets 48,545 9,040 41,983 14,145
------------------------------- ------- --------- -------- -------- ----------
Equity attributable to owners
Share capital 26 731 317 731 317
Share premium account 27 44,480 15,214 44,480 15,214
Merger reserves 27 (6,856) (6,856) (2,241) (2,241)
Foreign currency reserves 27 1,442 1,124 2,573 1,085
Share option reserve 27/32 493 253 493 253
Retained earnings 27 (17,993) (7,202) (4,983) (3,092)
------------------------------- ------- --------- -------- -------- ----------
Total equity 22,297 2,850 41,053 11,536
------------------------------- ------- --------- -------- -------- ----------
Liabilities
Non-current liabilities
Trade and other payables 23 2 42 - -
Lease liabilities 37 2,194 983 - -
Leasehold Provision 20 - - -
Total non-current liabilities 2,216 1,025 - -
------------------------------- ------- --------- -------- -------- ----------
Current liabilities
Trade and other payables 23 21,396 2,977 885 1,359
Deferred taxation 24 32 41 - -
Lease liabilities 37 2,245 444 - -
Borrowings 25 359 1,703 45 1,250
Total current liabilities 24,032 5,165 930 2,609
------------------------------- ------- --------- -------- -------- ----------
Total liabilities 26,248 6,190 930 2,609
------------------------------- ------- --------- -------- -------- ----------
Total equity and liabilities 48,545 9,040 41,983 14,145
------------------------------- ------- --------- -------- -------- ----------
Consolidated and Company's Statement of Cash Flows
For the year ended 31 December 2020
Group Group Company Company
2020 2019 2020 2019
Notes GBP'000 GBP'000 GBP'000 GBP'000
Cash Flow from operating activities
Continuing operations
Cash used in operations 28 2,540 (2,763) (6,568) (2,754)
Income tax (R & D) Received 1,631 - - -
----------------------------------------------------------- ------ -------- -------- -------- --------
Net cash used in operating activities 4,171 (2,763) (6,568) (2,754)
----------------------------------------------------------- ------ -------- -------- -------- --------
Cash flow from investing activities
Cash acquired with acquisition of subsidiary 2,276 36 - 36
Sale of Shares in Integumen PLC - 514 - -
Purchase of property, plant and equipment (818) (23) - -
Purchase of intangible asset (274)
Net cash used in investing activities 1,184 527 - 36
----------------------------------------------------------- ------ -------- -------- -------- --------
Cash flow from financing activities
Proceeds from issuance of ordinary shares & options 26 18,031 4,286 18,031 4,286
Costs of January and May fund raising (1,335) (603) (1,335) (603)
Exceptional Costs re RTO & restructuring 7 (2,108) (689) (867) (689)
Repayment of Invoice Discounting (156) (21) - -
Interest (Paid) (188) (113) (152) (268)
Loan Note Redemptions (1,205) (1,205)
Premium on conversion of Convertible Debentures to shares - 273 - 273
Net cash generated by financing activities 13,039 3,133 14,472 2,999
----------------------------------------------------------- ------ -------- -------- -------- --------
Net increase in cash and cash equivalents 18,394 897 7,904 281
Cash and cash equivalents at beginning of year 1,037 140 421 140
FX Translation (226) 364
Cash and cash equivalents at end of year 22 19,205 1,037 8,689 421
----------------------------------------------------------- ------ -------- -------- -------- --------
Consolidated and Company's Statement of Changes in Shareholders'
Equity
Group Share Foreign
Share Share Merger Option currency Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2019 - - - - - (1,463) (1,463)
Changes in
equity for the
Year ended 31
Dec 2019
(Loss) for the
year - - - - - (5,739) (5,739)
Currency
differences - - - - 1,124 - 1,124
Total
comprehensive
(loss)
For the year - - - - 1,124 (5,739) (4,615)
--------------- ---------- --------- ---------- ---------- ---------- ---------- -------------
Transactions
with the
owners
Transfer re
Open Orphan
PLC 316 15,200 (6,856) 151 - - 8,811
Share Based
Payment Res. - - - 102 - - 102
Shares issued 1 14 - - - - 15
---------------- --------- --------- ---------- ---------- ---------- ---------- -------------
Total
contributions
by and
distributions
to owners 317 15,214 (6,856) 253 - - 8,928
---------------- --------- --------- ---------- ---------- ---------- ---------- -------------
At 31 December
2019 317 15,214 (6,856) 253 1,124 (7,202) 2,850
Changes in
equity for the
Year ended 31
Dec 2020
(Loss) for the
year - - - - (10,791) (10,791)
Currency
differences - - - - 318 - 318
Total
comprehensive
(loss)
for the year - - - - 318 (10,791) (10,473)
---------------- --------- --------- ---------- ---------- ---------- ---------- -------------
Transactions
with the
owners
Share Based
Payment Res. - - - 240 - - 240
Shares issued 414 29,266 - - - - 29,680
Total
contributions
by and
distributions
to owners 414 29,266 - 240 - - 29,920
---------------- --------- --------- ---------- ---------- ---------- ---------- -------------
At 31 December
2020 731 44,480 (6,856) 493 1,442 (17,993) 22,297
---------------- --------- --------- ---------- ---------- ---------- ---------- -------------
Company Share Foreign
Share Share option Merger currency Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
At 1 January
2019 - - - - - (1,463) (1,463)
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
Changes in
equity for the
year
ended 31
December 2019
Total loss for
year - - - - - (1,629) (1,629)
Share Based
Payment Res. - - 102 - - - 102
Currency
differences - - - - 1,085 - 1,085
Transfer re Open
Orphan PLC 316 15,200 151 (2,241) - - 13,426
Shares issued 1 14 - - - - 15
Total
contributions
by and
distributions
to owners 317 15,214 253 (2,241) 1,085 (1,629) 12,999
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
At 31 December
2019 317 15,214 253 (2,241) 1,085 (3,092) 11,536
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
Changes in
equity for the
year
ended 31
December 2020
Total
comprehensive
loss for year - - - - - (1,891) (1,891)
Share Based
Payment Res. - - 240 - - - 240
Currency
differences - - - - 1,488 - 1,488
Shares issued 414 29,266 - - - - 29,680
Total
contributions
by and
distributions
to owners 414 29,266 240 - 1,488 (1,891) 29,517
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
At 31 December
2020 731 44,480 493 (2,241) 2,573 (4,983) 41,053
----------------- --------- --------- ---------- ---------- ---------- ---------- ---------------
Notes to the Financial Statements
For the year ended 31 December 2020
1. General information
Open Orphan Plc is a company incorporated in England and Wales.
The Company is a public limited company, limited by shares, 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 Queen Mary Bio
Enterprises, Innovation Centre, 42 New Road, London, E1 2AX,
UK.
The principal activity of the Group is that of a rapidly growing
specialist CRO pharmaceutical services company which is the world
leader in the testing of vaccines and antivirals using human
challenge clinical trials. The Group has a presence in the UK,
Ireland, France and Netherlands.
The financial statements are presented in GBPGBP'000 (except
where indicated otherwise), the currency of the primary economic
environment in which the Group's trading companies operate. The
Group comprises Open Orphan Plc and its subsidiary companies as set
out in note 18. The Board decided to change the presentation
currency of the Group from Euro (EUR) to pounds Sterling (GBP) in
2020 given the increased weighting of our UK operations on our
Financial Statements as a result of the merger between Open Orphan
plc and hVIVO plc in January 2020. See note 38 for further
details.
The registered number of the Company is 07514939.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. The
policies have been consistently applied throughout the year, unless
otherwise stated.
Basis of preparation
Open Orphan Plc (formerly Venn Life Sciences Holdings Plc)
completed an IPO on the London AIM Exchange and the Dublin Euronext
exchange on 28 June 2019 through a reverse acquisition of Open
Orphan DAC, an Irish Company, into Venn Life Sciences Holdings Plc
(Venn), a UK company. Based on the accounting standards under IFRS
3 and IFRS 10, the Group has determined that the entity with
control of the combined group after the combination is Open Orphan
DAC. It was therefore determined that reverse acquisition
accounting is to be applied for presentation of the financial
statements of the Group. This means that results reported for 2019
reflect those of Open Orphan DAC for the full 12-month period and
for Venn Life Sciences group Plc group from 01 July 2019 to year
end. The % of the enlarged share capital represented by the
consideration shares issued to Open Orphan DAC on the reverse
takeover was 40.1% which represented a fair value consideration of
GBP5.7m.
Open Orphan Plc completed, on 17(th) January 2020, an
acquisition of the hVIVO group. The results reported for 2020
reflect those of Open Orphan Plc and Venn Group for the full
12-month period and for hVIVO group from 17 January 2020 to year
end. The % of the enlarged share capital represented by the
consideration shares issued to hVIVO group on the acquisition
takeover was 33.1% which represented a fair value consideration of
GBP12.96m.
The Balance Sheet reported for the period reflect those of the
combined group with share capital reflecting the position of the
ultimate parent company Open Orphan Plc.
For information purposes, a pro forma statement of Comprehensive
Income for the full calendar year 2020 and comparable periods for
Open Orphan Plc on a stand-alone basis is presented in the
chairman's statement to allow a normalized presentation of
Comprehensive Income for the Group during the year 2020.
The consolidated financial statements of Open Orphan Plc have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs), IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS.
The consolidated financial statements have been prepared under
the historical cost convention.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 4.
Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the
previous financial year.
The changes to new standards for the current period and
effective from 1 January 2020 include:
IFRS 3 Business Combinations
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors
We consider that there has been no impact on adoption of the new
standards on the Group.
Summary of new accounting policies
Several other amendments and interpretations apply for the first
time in 2020, but do not have an impact on the Consolidated
Financial Statements of the Group.
The Group has not early adopted any amendment, standard or
interpretation that has been issued but is not yet effective.
Standards issued but not yet effective
There were a number of standards and interpretations which were
in issue at 31 December 2020 but not effective for periods
commencing 1 January 2020 and have not been adopted for these
Financial Statements. The Directors have assessed the full impact
of these accounting changes on the Company. To the extent that they
may be applicable, the Directors have concluded that none of these
pronouncements will cause material adjustments to the Group's
Financial Statements. They may result in consequential changes to
the accounting policies and other note disclosures. The new
standards will not be early adopted by the Group and will be
incorporated in the preparation of the Group Financial Statements
from the effective dates noted below.
The new standards include:
*IFRS 17 Insurance Contracts(2)
(*) IFRS 9 Interest Rates(1)
(*) IAS39/IFRS7 Benchmark Reform(1)
*IFRS16 (Amendment) Leases' - Covid [1]19 related rent concessions
(1)
*IAS 1 Presentation of Financial Statements(2)
1 Effective for annual periods beginning on or after 1 January
2021
2 Effective for annual periods beginning on or after 1 January
2023
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Group.
Going concern
The Directors have prepared the financial statements on a going
concern basis. During the financial year ended 31 December 2020 the
Group made a loss of GBP10.5m but had net cash inflows from
operating activities of GBP2.6m, however the Directors consider the
use of the going concern basis to be appropriate. The Directors
have prepared working capital projections which show that with cash
balances on hand at 31 December 2020, the Group & Company will
have sufficient funding to be able to continue as a going
concern.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings.
Subsidiaries are all entities over which the Group has the power to
govern their financial and operating policies generally
accompanying a shareholding of more than fifty per cent of the
voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries
are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date
that control ceases.
Inter-Company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Associates are all entities over which the group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and
the carrying amount is increased or decreased to recognise the
group's share of the profit or loss of the associate after the date
of acquisition.
The group's share of post-acquisition profit or loss is
recognised in the income statement.
(a) Acquisition accounting
The Group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred, and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration agreement. Acquisition related costs are expensed as
incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. On
an acquisition-by-acquisition basis, the Group recognises any
non-controlling interest in the acquiree either at fair value or at
the non-controlling interest's proportionate share of the
acquiree's net assets.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the
fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair
value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognised directly in the
income statement.
Investments in subsidiaries are accounted for at cost less
impairment. Cost is adjusted to reflect changes in consideration
arising from contingent consideration amendments. The acquisition
of the hVIVO group in January 2020 was accounted for using
principles of acquisition accounting.
(b) Associates
Associates are all entities over which the group has significant
influence but not control or joint control as defined under IAS28.
This is generally the case where the group holds between 20% and
50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting (see equity method
below), after initially being recognised at cost less any fair
value adjustment.
Equity Method:
Under the equity method of accounting, the investments are
initially recognised at cost and adjusted thereafter to recognise
the group's share of the post-acquisition profits or losses of the
investee in profit or loss, and the group's share of movements in
other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of
the investment.
When the group's share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the group does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the other entity. Unrealised gains on
transactions between the group and its associates and joint
ventures are eliminated to the extent of the group's interest in
these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
Accounting policies of equity accounted investees have been
changed where necessary to ensure consistency with the policies
adopted by the group. The carrying amount of equity-accounted
investments is tested for impairment in accordance with the policy
described in page 28.
(c) Group re-organisation
The Group re-organisation of common control transaction is
scoped out under IFRS 3. The results of the Group and all of its
subsidiary undertakings affected by the group re-organisation are
accounted using the merger accounting method. The method
of accounting for such business combination is treated to take
place before the transition of IFRS. The investment is recorded at
the nominal value of the shares issued, together with the fair
value of any additional consideration paid.
Merged subsidiary undertakings are treated as if they had always
been a member of the Group. This treatment is permitted under the
exemption in IFRS 1 to not restate acquisitions before
transition.
The corresponding figures for the previous period include its
results for that period, the assets and liabilities at the previous
balance sheet date and the shares issued by the company as
consideration as if they had always been in issue. Any difference
between the nominal value of the shares acquired by the Company and
those issued by the company to acquire them is taken to reserves as
re-organisation reserve.
(d) Reverse acquisition accounting
The acquisition of Venn Life Sciences Holdings Plc (renamed Open
Orphan Plc) and its subsidiaries by Open Orphan DAC on 27 June 2019
has been accounted using the principles of reverse acquisition
accounting. Although the Group financial statements have been
prepared in the name of the legal parent, Open Orphan Plc, they are
in substance a continuation of the consolidated financial
statements of the legal subsidiary, Open Orphan DAC. The following
accounting treatment has been applied in respect of the reverse
accounting:
The assets and liabilities of the legal subsidiary, Open Orphan
DAC, are recognised and measured in the Group financial statements
at the pre-combination carrying amounts, without restatement of
fair value. The retained earnings and other equity balances
recognised in the Group financial statements reflect the retained
earnings and other equity balances of Open Orphan DAC immediately
before the business combination and the results of the period from
1 January 2019 to the date of the business combination are those of
Open Orphan DAC. However, the equity structure appearing in the
Group financial statements reflects the equity structure of the
legal parent, Open Orphan Plc (formerly Venn Life Sciences Holdings
Plc), including the equity instruments issued in order to affect
the business combination.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic
environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in
GBP, which is the functional and presentation currency of the main
operating entities. The prior set of financial statements were
presented in EUR, being the functional and presentation currency of
the group then. The comparative figures have been restated to be
comparable. See translation in note 38.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions where items are re-measured. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in
the income statement within 'administrative expenses', except when
deferred in other comprehensive income as qualifying cash flow
hedges and qualifying net investment hedges.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentational currency as
follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each income statement are translated at average exchange rates; and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are taken
to other comprehensive income. When a foreign operation is
partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part
of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors who make
strategic decisions.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any provision for impairment.
Historical cost includes expenditure that is directly attributable
to the acquisition of the asset and bringing the asset to its
working condition for its intended use.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only where it is
probable that future economic benefits associated with the asset
will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Any borrowing costs associated with qualifying property, plant and
equipment are capitalised and depreciated at the rate applicable to
that asset category.
Depreciation on assets is calculated using the straight-line
method or reducing balances method to allocate their cost to its
residual values over their estimated useful lives, as follows:
Leasehold Improvements the shorter of five years or the
life of the lease
Plant & Machinery four years
Fixtures and fittings three to five years
The assets' residual values and useful economic lives are
reviewed regularly, and adjusted if appropriate, at the end of each
reporting period.
An asset's carrying value is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by
comparing the proceeds with the carrying amount and are recognised
in administration expenses in the income statement.
Intangible assets
(a) Goodwill
Goodwill represents the excess amount of the cost of an
acquisition over the fair value of the Group's share of the net
identifiable assets of the acquired underlined businesses at the
date of the acquisition. Goodwill on acquisitions of businesses is
included in 'intangible assets'. In normal cases Goodwill has an
indefinite useful life and is tested annually for impairment and
carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the
disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose, identified according to operating segment.
(b) Trade secrets
Trade secrets, including technical know-how, operating
procedures, contact network, methods and processes, acquired in a
business combination are recognised at fair value at the
acquisition date. Trade secrets have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method to allocate the cost of
trade secrets over their estimated useful lives of 10 years and is
charged to administrative expenses in the income statement.
c) Intellectual property rights
Intellectual property rights relate to patents acquired by the
Group. Amortisation is calculated using the straight-line method
over the expected life of 10 years and is charged to administrative
expenses in the income statement.
d) Capitalised Software development, Licences and Preferential
right to reserve a slot
Internally generated intangible assets - research and
development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred. Development costs are
capitalised when the related products meet the recognition criteria
of an internally generated intangible asset, the key criteria being
as follows:
-- technical feasibility of the completed intangible asset has been established;
-- it can be demonstrated that the intangible asset will
generate probable future economic benefits;
-- adequate technical, financial and other resources are
available to complete the development;
-- the expenditure attributable to the intangible asset can be reliably measured; and
-- management has the ability and intention to use or sell the intangible asset.
Expenses for research and development include associated wages
and salaries, material costs, depreciation on non -- current assets
and directly attributable overheads. Development costs recognised
as assets are amortised over their expected useful life.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not
subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset's fair value
less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of the money and the risks specific
to the asset which the estimates of future cash flows have not been
adjusted.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows. Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is
charged pro rata to the other assets in the cash-generating
unit.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in the prior period. A
reversal of an impairment loss is recognised in the income
statement immediately. If goodwill is impaired however, no reversal
of the impairment is recognised in the financial statements.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and
subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or
loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15. Refer
to the accounting policies in note 35 Revenue from contracts with
customers.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are 'solely payments of principal and interest
(SPPI)' on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the marketplace (regular way trades) are recognised on the trade
date, i.e., the date that the Group commits to purchase or sell the
asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- Financial assets at amortised cost (debt instruments)
-- Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
-- Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
-- Financial assets at fair value through profit or loss
However, only financial assets at amortised cost are discussed
as all the Group's financial assets are measured at amortised cost,
with the exception of investments in subsidiaries and associates
which are held at cost less impairment.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group
measures financial assets at amortised cost if both of the
following conditions are met:
-- The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows, and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost comprise of trade
and other receivables and cash and cash equivalents.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated statement
of financial position) when:
-- The rights to receive cash flows from the asset have expired, OR
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a passthrough arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Group continues to recognise
the transferred asset to the extent of its continuing involvement.
In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
Impairment of financial assets
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
the consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated
provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables and loans and borrowings.
Subsequent measurement
Loans and borrowings
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included as finance costs in
the statement of profit or loss. This category generally applies to
interest-bearing loans and borrowings. For more information, refer
to Note 25.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
profit or loss.
Inventories
Inventories are reported at the lower of cost (purchase price
and/or production cost) and net realisable value. Net realisable
value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and applicable
variable selling expenses.
Inventories comprise completed manufactured 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, with cost including 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 where net realisable value is lower
than cost, or which are considered to be obsolete. Any inventories
which management considers are not usable on future commercial
engagements are provided against in the statement of comprehensive
income.
Trade and other receivables
Trade receivables are initially recognised at fair value, being
the original invoice amount, and subsequently measured at amortised
cost less provision for impairment. A provision for impairment is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivable. Trade receivables that are less than three
months past due date are not considered impaired unless there are
specific financial or commercial reasons that lead management to
conclude that the customer will default. Older debts are considered
to be impaired unless there is sufficient evidence to the contrary
that they will be settled. The amount of the provision is the
difference between the asset's carrying value and the present value
of the estimated future cash flows. The carrying amount of the
asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the income statement within
administrative expenses. When a trade receivable is uncollectible
it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value and subsequently measured at amortised cost
using the effective interest method.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at bank and in hand and short-term deposits with an original
maturity of less than three months, reduced by overdrafts to the
extent that there is a right of offset against other cash
balances.
For the purposes of the consolidated cash flow statement, cash
and cash equivalents consist of cash and short-term deposits as
defined above net of outstanding bank overdrafts.
Share capital
Ordinary Shares and Deferred shares are classified as equity.
Proceeds in excess of the nominal value of shares issued are
allocated to the share premium account and are also classified as
equity. Incremental costs directly attributable to the issue of new
Ordinary Shares or options are deducted from the share premium
account.
Merger reserve
The reserve represents a premium on the issue of the ordinary
shares for the acquisition of subsidiary undertakings. The relief
is only available to the issuing company securing at least a 90%
equity holding in the acquired undertaking in pursuance of an
arrangement providing for the allotment of equity shares in the
issuing company on terms that the consideration for the shares
allotted is to be provided by the issue to the issuing company of
equity shares in the other company.
Borrowings
Borrowings are recognised initially at the fair value of
proceeds received, net of transaction costs incurred. Borrowings
are subsequently carried at amortised cost. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income
statement under the heading 'finance costs'. Arrangement and
facility fees together with bank charges are charged to the income
statement under the heading 'administrative costs'.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income where the
associated tax is also recognised in other comprehensive
income.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and
generate taxable income. Management evaluates positions taken in
tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to
the tax authorities.
Deferred tax is disclosed in accordance with IAS 12 and
recognised using the liability method, on all temporary differences
at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes. Deferred tax liabilities are recognised in respect of all
temporary differences except where the deferred tax liability
arises from the initial recognition of goodwill in business
combinations.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and tax losses, to
the extent that they are regarded as recoverable. They are regarded
as recoverable where, on the basis of available evidence, there
will be sufficient taxable profits against which the future
reversal of the underlying temporary differences can be
deducted.
The carrying value of the amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all, or part, of the tax asset to be
utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on the tax rates (and
tax laws) that have been substantively enacted at the balance sheet
date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Right of use assets
The Group recognises right of use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right of use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right of use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right of use assets is
depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right of use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.,
below $5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis
over the lease term.
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined
contribution plans. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a separate
entity with the pension cost charged to the income statement as
incurred.
The Group has no further obligations once the contributions have
been paid.
Share-based payment
Where equity settled share options and warrants are awarded to
directors and employees, the fair value of the options and warrants
at the date of grant is charged to the consolidated statement of
comprehensive income over the vesting period and the corresponding
entry recorded in the share-based payment reserve. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each reporting date so
that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Leasehold provision
Provisions for dilapidations and onerous lease commitments are
recognised when the Company has a present or constructive
obligation as a result of past events. The recognition of provision
requires management to make best estimates of the consideration
required to settle the present obligation at the end of the
reporting period, taking into account the risks and uncertainties
surrounding the obligation. There is reasonable uncertainty around
the likelihood and timing of the exit of the lease as negotiations
will involve third parties. The provision is discounted for the
time value of money.
Revenue recognition
(a) Revenue from Contracts in the Venn Life Sciences Group
The group provides clinical consulting services and drug
development services. Revenue from providing services is recognised
in the accounting period in which the services are rendered. For
fixed-price contracts, revenue is recognised based on the actual
service provided to the end of the reporting period as a proportion
of the total services to be provided because the customer receives
and uses the benefits simultaneously. This is determined in
reference to the stage of completion which is measured by labour
hours incurred to the period end as a percentage of the total
estimated labour hours for the contract. Where the contract outcome
cannot be measured reliably, revenue is recognised to the extent of
the expenses recognised that are recoverable.
Some contracts include multiple performance obligations in the
form of various service offerings. Where the contracts include
multiple performance obligations, the transaction price will be
allocated to each performance obligation measured by reference to
labour hours incurred to the period end as a percentage of the
total estimated labour hours to achieve a particular performance
obligation. Where the contract outcome cannot be measured reliably,
revenue is recognised to the extent of the expenses recognised that
are recoverable.
Estimates of revenues, costs or extent of progress toward
completion are revised if circumstances change. Any resulting
increases or decreases in estimated revenues or costs are reflected
in profit or loss in the period in which the circumstances that
give rise to the revision become known by management.
In case of fixed-price contracts, the customer pays the fixed
amount based on a payment schedule. If the services rendered by the
group exceed the payment, a contract asset is recognised. If the
payments exceed the services rendered, a contract liability is
recognised.
Terms and Conditions tend to vary from contract to contract and
in general the payment terms tend to be between 30 and 90 days in
The Netherlands and between 30 and 60 days in France and
Ireland.
Some contracts include references to milestone events. Where no
fee is payable until a milestone is achieved, revenue is recognised
up to the value of the milestone event set to occur.
The group is applying practical expedient per IFRS 15 to not
disclose the aggregate amount of the transaction price allocated to
the performance obligations that are unsatisfied (or partially
unsatisfied) as of the end of the reporting period as the entity
has a right to consideration from a customer in an amount that
corresponds directly with the value to the customer of the entity's
performance completed to date and recognise revenue in the amount
to which the entity has a right to invoice.
(b) Revenue from contracts in the hVIVO Group
Revenue from contracts with customers is recognised at an amount
that reflects the consideration to which the Company expects to be
entitled in exchange for the goods or services and is shown net of
Value Added Tax.
Service revenues
The Company primarily earns revenues by undertaking client
clinical services engagements. A client clinical services
engagement typically comprises a number of quarantine cohorts. Each
quarantine cohort lasts two to three weeks, but the timeline of
work involved in building up to undertaking a clinical study is in
the range of three to twelve months. Whether a client clinical
services engagement is for one quarantine cohort or for a number of
quarantine cohorts, the overall timeline of the engagement is much
the same, apart from the additional time for the quarantine cohorts
themselves and the time lags in between quarantine cohorts (with
some cohorts offset in parallel and some sequential), as much of
the upfront work is the same whether for one or a number of
quarantine cohorts.
Client clinical services revenue is recognised based on a
performance over time, as the performance of the clinical services
engagements do not create an asset with an alternative use to the
Company and the Company has an enforceable right to payment for the
performance completed to date.
The Company measures its progress towards the satisfaction of
performance obligations using output measures. Depending on the
contractual terms, revenue from contracts with customers is
recognised based on the level of work completed to date in respect
of each individual performance obligation of the client clinical
services 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 (contract modifications). Contract
modifications are assessed based on the terms of the contract.
Contract modifications which are distinct and provided at a
stand-alone selling price are accounted for as a separate contract.
Where modifications are not distinct or provided at a stand-alone
selling price, the Company evaluates whether the remaining goods or
services are distinct from those already provided. If so, the
modification is accounted for as a termination of the existing
contract and the creation of a new contract. If not, the
transaction price and measure of progress is updated for the single
performance obligation and amounts are recognised as revenue by
revision to the total contract value arising as a result.
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 the performance of the contractual arrangement.
The difference between the amount of revenue from contracts with
customers recognised and the amount invoiced on a particular
contract is included in the statement of financial position as
contract liabilities. Normally amounts become billable in advance
upon the achievement of certain milestones, in accordance with
pre-agreed invoicing schedules included in the contract or on
submission of appropriate detail. Any cash payments received as a
result of this advance billing are not representative of revenue
earned on the contract as revenues are recognised over the period
during which the specified contractual obligations are fulfilled.
Amounts included in contract liabilities 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 from contracts with customers
is greater than aggregate milestone billings at the date of
termination, cancellation clauses provide for the Company to be
paid for all work performed to the termination date (enforceable
right to payment for services provided to date).
Licensing revenues
Where licensing arrangements have a single contracted
performance obligation to provide the right to use intellectual
property which exists at a certain point in time, such as the
delivery of a licence for study data, revenue from contracts with
customers is recognised when the Company has transferred to the
customer control over the intellectual property, which generally
occurs at the beginning of the period for which the customer has
the right to use the intellectual property. Licence revenue for
such arrangements is therefore generally recognised at the point of
delivery of the data when the performance obligation has been
satisfied. Until this point in time, any amount invoiced in respect
of the arrangement is presented in the statement of financial
position as a contract liability. Costs associated with development
of the study data are capitalised as a current intangible asset
from the point that it is probable future economic benefits will be
generated and are transferred to cost of sales upon handover of the
deliverable.
Where licensing arrangements are determined to have contracted
performance obligations to provide a right of access to the
intellectual property, revenue is recognised over time, in line
with the methods applied in recognising service revenues.
(c) Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that
asset's net carrying amount.
(d) Royalty and license income
Royalty and license income are recognised on an accruals basis
in accordance with the substance of the relevant agreements.
Exceptional items
These are items of an unusual or non-recurring nature incurred
by the Group and include transactional costs and one-off items
relating to business combinations, such as acquisition expenses,
restructuring and redundancy costs.
3. Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (foreign exchange risk and cash flow interest
rate risk), credit risk, liquidity risk, capital risk and fair
value risk. The Group's overall risk management programme focuses
on the unpredictability of the financial markets and seeks to
minimise the potential adverse effects on the Group's financial
performance. The Group does not use derivative financial
instruments to hedge risk exposures.
Risk management is carried out by the head office finance team.
It evaluates and mitigates financial risks in close co-operation
with the Group's operating units. The Board provides principles for
overall risk management whilst the head office finance team
provides specific policy guidance for the operating units in terms
of managing foreign exchange risk, credit risk and cash and
liquidity management.
a) Market risk
(i) Foreign exchange - cash flow risk
The Group's presentation currency is GBPGBP although it operates
internationally and is exposed to foreign exchange risk arising
from various currency exposures, primarily between Euro, USD and
the GBP such that the Group's cash flows are affected by
fluctuations in the rate of exchange between Euro and the
aforementioned foreign currencies.
Management do not use derivative financial instruments to
mitigate the impact of any residual foreign currency exposure not
mitigated by the natural hedge within the business model. The Group
does not speculate in foreign currencies and no operating Company
is permitted to take unmatched positions in any foreign
currency.
(ii) Foreign exchange - Fair value risk
Translation exposures that arise on converting the results of
overseas subsidiaries are not hedged. Net assets held in foreign
currencies are hedged wherever practical by matching borrowings in
the same currency. The principal exchange rates used by the Group
in translating overseas profits and net assets into GBP GBP are set
out in the table below.
Average Average Year end Year end
rate 2020 rate 2019 rate 2020 rate 2019
----------------------- ----------- ----------- ----------- -----------
Rate compared to Euro
GBP 0.89 0.88 0.90 0.85
US Dollar 1.14 1.13 1.23 1.12
Rate compared to GBP Average Average Year end Year end
rate 2020 rate 2019 rate 2020 rate 2019
----------------------- ----------- ----------- ----------- -----------
Euro 1.12 1.14 1.11 1.18
US Dollar 1.28 1.28 1.26 1.32
----------------------- ----------- ----------- ----------- -----------
As a guide to the sensitivity of the Group's results to
movements in foreign currency exchange rates, a one penny movement
in the GBP to Euro rate would impact annual earnings by
approximately GBP3,000 due to natural hedging (2019 -
GBP1,000).
(iii) Cash flow and fair value interest rate risk
The Group has assets in the form of cash and cash equivalents
and limited interest-bearing liabilities which relate to
long-term
borrowing. Interest rates on cash and cash equivalents are
currently zero whilst interest rates on borrowings have been fixed
and therefore expose the Group to fair value interest rate risk.
The Group does not speculate on future changes in interest
rates.
Where overseas acquisitions are made, it is the Group's policy
to arrange any borrowings required in local currency.
It is the Group's policy not to trade in derivative financial
instruments. The Group does not use interest rate swaps.
(b)Credit risk
Credit risk is managed on a Group basis, except for credit risk
relating to accounts receivable balances. Each local subsidiary and
operating business unit is responsible for managing and analysing
the credit risk for each of their new clients before standard
payment and delivery terms and conditions are offered. It is the
Group policy to obtain deposits from customers where possible,
particularly
overseas customers. In addition, the Group will seek confirmed
letters of credit for the balances due. Credit risk is managed at
the operating business unit level and monitored at the Group level
to ensure adherence to Group policies. If there is no independent
rating, local management assesses the credit quality of the
customer, taking into account its financial position, past
experience and other factors. Individual risk limits are set based
on internal or external ratings in accordance with limits set by
the board. The utilisation of credit limits is regularly
monitored.
Credit risk also arises from cash and cash equivalents,
derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to
customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating
entities of the Group and is aggregated by Group finance. Group
finance monitors cash and cash flow forecasts and it is the Group's
liquidity risk management policy to maintain sufficient cash and
available funding through an adequate amount of cash and cash
equivalents and committed credit facilities from its bankers. Due
to the dynamic nature of the underlying businesses, the head office
finance team aims to maintain flexibility in funding by keeping
sufficient cash and cash equivalents available to fund the
requirements of the Group.
The Group's policy in relation to the finance of its overseas
operations requires that sufficient liquid funds be maintained in
each of its territory subsidiaries to support short and medium-term
operational plans. Where necessary, short-term funding is provided
by the holding Company. In the UK, the working capital bank
facility and the management of liquid funds in excess of
operational needs are controlled centrally. Typically, excess funds
are placed as short-term deposits, to provide a balance between
interest earnings and flexibility.
The table below analyses the Group's non-derivative financial
liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted
cash flows.
Less than Between Between More than Total
one year 1 and 2 2 and 5 5 years GBP'000
years years
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- ---------- -------- -------- ---------- --------
At 31 December 2020:
Borrowings 25 359 - - - 359
Leased Liabilities 37 2,245 1,510 684 - 4,439
Trade and other payables 23 21,396 2 - - 21,398
-------------------------- ----- ---------- -------- -------- ---------- --------
At 31 December 2019:
Borrowings 25 1,703 - - - 1,703
Leased Liabilities 37 444 328 655 - 1,427
Trade and other payables 23 2,977 40 2 - 3,019
-------------------------- ----- ---------- -------- -------- ---------- --------
(d) Capital risk management
The Group's objectives when managing capital are to safeguard
the ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital.
The Group monitors capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net
debt is calculated as total borrowings (including "current and
non-current borrowings" as shown in the consolidated balance sheet)
less cash and cash equivalents. Total capital is the sum of net
debt plus equity.
The Group is currently largely un-geared, having net cash at 31
December 2020. It is the stated strategy of the Group to grow both
organically and through acquisition with acquisitions to be funded
through a mixture of debt and equity funding.
4. Critical accounting estimates and judgements
In the process of applying the Group's accounting policies,
management has made accounting judgements in the determination of
the carrying value of certain assets and liabilities. Due to the
inherent uncertainty involved in making assumptions and estimates,
actual outcomes will differ from those assumptions and estimates.
The following judgements have the most significant effect on the
amounts recognised in the financial statements.
(a) Business combinations
The recognition of business combinations requires the excess of
the purchase price of acquisitions over the net book value of
assets acquired to be allocated to the assets and liabilities of
the acquired entity. The Group makes judgements and estimates in
relation to the fair value allocation of the purchase price. If any
unallocated portion is positive it is recognised as goodwill.
However, in applying the reverse acquisition accounting method this
has necessitated the Group to recognise the unallocated portion as
deemed acquisition costs as required under IFRS 3 - Business
Combinations. See also note 2 (d) regarding reverse acquisition
accounting treatment for most recent transaction.
(b) Impairment of goodwill and cost of investments
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in note
2. The recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. These calculations
require the use of estimates as set out in note 17. In addition,
the Group has also considered the impairment of the investments in
the subsidiaries undertakings as set out in note 18.
(c) Impairment of receivables
Trade and other receivables are carried at the contractual
amount due less any estimated provision for non-recovery. Provision
is
made based on a number of factors including the age of the
receivable, previous collection experience and the financial
circumstances of the counterparty.
(d) Deferred tax assets
Deferred tax assets are only recognised to the extent that it is
probable that future taxable profits will be available against
which deductible temporary differences can be utilised. See note
24.
(e) Intangible assets
The Group amortises intangible assets over their estimated
useful life. The useful lives of Trade Secrets, Intellectual
Property Rights, software, licences and Preferential Right to
Reserve a Slot have been estimated by the Group as stated in note
2. The Group tests annually whether there is any indication that
Intangible assets have been impaired.
(f) Revenue recognition
Estimates of revenues, costs or extent of progress toward
completion are revised if circumstances change. Any resulting
increases or decreases in estimated revenues or costs are reflected
in profit or loss in the period in which the circumstances that
give rise to the revision become known by management. At each
period end, management reviews each material individual contract to
assess whether any anticipated losses should be recognised
immediately. Revenue in relation to the licensing of data is
recognised when data is delivered to the customer.
(g) Virus inventory
In valuing virus inventory, management is required to make
assumptions in relation to the future commercial use, being both
external client revenue engagements, engagements with our equity
investments and internal research and development engagements, for
each virus. This includes consideration of both the current
business pipeline and management's estimates of the future virus
requirements, based on its significant knowledge and experience in
the field of virology.
(h) Research and development tax credit
Hvivo Services Limited's research and development tax claim is
complex and requires management to make significant assumptions in
building the methodology for the claim, interpreting research and
development tax legislation to the Company's specific
circumstances, and agreeing the basis of the Company's tax
computations with HM Revenue & Customs.
(i) Leasehold provision
Provisions for dilapidations and onerous lease commitments are
recognised when the Group has a present or constructive obligation
as a result of past events. The recognition of provision requires
management to make best estimates of the consideration required to
settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the
obligation. There is reasonable uncertainty around the likelihood
and timing of the exit of the lease as negotiations will involve
third parties. The provision is discounted for the time value of
money.
5. 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 as the industry-leading
clinical development services (CDS) business pioneering human
disease models based upon viral challenge. Using human challenge
studies to establish early proof-of-concept, hVIVO's clinical trial
platform can accelerate drug and vaccine development in respiratory
and infectious diseases.
A second business unit is that of a Clinical Research
Organisation (CRO) providing a suite of consulting and clinical
trial services to pharmaceutical, biotechnology and medical device
organisations. As the majority of Venn Life Sciences Group
business' contracts are large, multi-country contracts, pulling
resources from many different locations, the CODM considers this
one business unit.
A third business unit relates to the development of a Data
platform of rare disease patients in Europe.
Currently the key operating performance measures used by the
CODM are Revenue and adjusted EBITDA (before exceptional
items).
The segment information provided to the Board for the reportable
segments for the year ended 31 December 2020 is as follows:
2020 2020 2020 2020 2019
CRO Data CDS Total Total
Platform
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- ---------- --------- --------- --------
Income statement
External revenue and other
income 7,842 - 14,153 21,995 3,543
------------------------------------- -------- ---------- --------- --------- --------
EBITDA before exceptional
items (3,313) (431) (2,522) (6,266) (3,781)
Exceptional items (1,648) - (477) (2,125) (711)
-------------------------------------
EBITDA (4,961) (431) (2,999) (8,391) (4,492)
Depreciation (590) (4) (1,288) (1,882) (296)
Amortisation (53) - (116) (169) (331)
------------------------------------- -------- ---------- --------- --------- --------
Operating (loss) (5,604) (435) (4,403) (10,442) (5,119)
Net finance (costs) 57 (113) (318) (374) (350)
Share Options Reserve charge (50) - (190) (240) (106)
Loss on Financial Asset Investments - - (107) (107) (231)
Retained (loss) before tax (5,597) (548) (5,018) (11,163) (5,806)
------------------------------------- -------- ---------- --------- --------- --------
Segment assets
Intangibles 5,763 - 364 6,127 2,875
PPE 86 13 969 1,068 190
Investment in associate - - 7,076 7,076 -
ROU Assets 934 - 3,296 4,230 1,311
Inventories - - 953 953 -
Trade and other debtors 5,633 (1,169) 5,422 9,886 3,627
Cash 9,215 13 9,977 19,205 1,037
------------------------------------- -------- ---------- --------- --------- --------
Total assets 21,631 (1,143) 28,057 48,545 9,040
------------------------------------- -------- ---------- --------- --------- --------
Segment liabilities
Operating liabilities (3,429) (119) (22,341) (25,889) (4,487)
Borrowings (45) (314) - (359) (1,703)
------------------------------------- -------- ---------- --------- --------- --------
Total liabilities (3,474) (433) (22,341) (26,248) (6,190)
------------------------------------- -------- ---------- --------- --------- --------
6. Expenses - analysis by nature
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Employee benefit expense (note 10) 15,240 5,202
PPE Depreciation (note 16) and amortisation (note 17) 368 393
Depreciation related to Right of use Assets (Note 37) 1,684 234
Exceptional items (note 7) 2,125 711
Inventories consumed 727 -
Professional fees 1,326 453
IT 1,021 194
Premises Costs 1,331 229
Volunteer costs 961 -
Agency, Subcontractors and freelancers 1,691 279
Other expenses 5,963 978
------------------------------------------------------- -------- --------
Total direct project and administrative costs 32,437 8,673
------------------------------------------------------- -------- --------
7. Exceptional items
Included within Administrative expenses are exceptional items as
shown below:
2020 2019
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Exceptional items include:
- Transaction costs relating to business combinations
and acquisitions 2,125 711
Total exceptional items 2,125 711
-------------------------------------------------------- -------- --------
8. Auditor remuneration
Services provided by the Company's auditor and its associates.
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
2020 2019
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Fees payable to Company's auditor for the audit of the
parent Company and consolidated financial statements 36 26
Fees payable to Company's auditor for the audit of subsidiaries
and their consolidated financial statements 60 21
----------------------------------------------------------------- -------- --------
Total paid to the Company Auditor 96 47
----------------------------------------------------------------- -------- --------
Fees payable to the auditors of subsidiaries for services:
- The audit of Company's subsidiaries pursuant to legislation
paid to other Auditors 48 45
- Other services paid to other Auditors 40 44
- Tax services paid to other Auditors 8 8
----------------------------------------------------------------- -------- --------
Total paid to Other Auditors 96 97
----------------------------------------------------------------- -------- --------
Total auditor's remuneration 192 144
----------------------------------------------------------------- -------- --------
9. Directors' emoluments
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Aggregate emoluments (11 directors) 576 326
Social Security Costs 69 39
Contribution to defined contribution pension scheme (3
directors) 20 13
-------------------------------------------------------- -------- --------
Total directors' remuneration 665 378
-------------------------------------------------------- -------- --------
See further disclosures within the Remuneration Report on page
15.
2020 2019
Highest paid Director GBP'000 GBP'000
------------------------------------- -------- --------
Total emoluments received 178 90
Defined contribution pension scheme - 13
------------------------------------- -------- --------
No share options were exercised in the year by highest paid
director nor was there any shares awarded to that director in the
year.
10. Employee benefit expense
2020 2019
GBP'000 GBP'000
-------------------------------- -------- --------
Wages and salaries 12,461 4,203
Social security costs 1,944 722
Pension costs 835 277
-------------------------------- -------- --------
Total employee benefit expense 15,240 5,202
-------------------------------- -------- --------
11. Average number of people employed
2020 2019
No No
---------------------------------------------------------- ----- -----
Average number of people (including Executive Directors)
employed was:
Administration 41 34
Clinical research 129 100
Sales and marketing 9 9
---------------------------------------------------------- ----- -----
Total average number of people employed 179 143
---------------------------------------------------------- ----- -----
12. Finance income and costs
2020 2019
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Interest expense:
- Interest on Lease liabilities (Note 37) (243) (48)
- Interest on other loans (131) (302)
--------------------------------------------------- -------- --------
Finance costs (374) (350)
--------------------------------------------------- -------- --------
Finance income
- Interest income on cash and short-term deposits - -
--------------------------------------------------- -------- --------
Finance income - -
--------------------------------------------------- -------- --------
Net finance expense (374) (350)
--------------------------------------------------- -------- --------
13. Income tax expense
2020 2019
Group GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current tax:
Current year research and development tax credit (363) -
Overprovision of prior year tax charge - -
Total current tax (credit) (363) -
--------------------------------------------------- -------- --------
Deferred tax (note 24):
Origination and reversal of temporary differences (9) (67)
--------------------------------------------------- -------- --------
Total deferred tax (9) (67)
--------------------------------------------------- -------- --------
Income tax (credit) (372) (67)
--------------------------------------------------- -------- --------
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:
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- --------- --------
(Loss) before tax (11,163) (5,806)
---------------------------------------------------------------- --------- --------
Tax calculated at domestic tax rates applicable to UK standard
rate of tax of 19.00% (2019 - 19%) (2,121) (1,107)
Tax effects of:
- Expenses not deductible for tax purposes 421 166
- Current Year R & D Tax credit (207) -
-Temporary timing differences (10) (67)
- Losses carried forward 1,545 941
Income tax (credit) (372) (67)
---------------------------------------------------------------- --------- --------
There are no tax effects on the items in the statement of
comprehensive income.
The subsidiary, hVIVO Services Limited, claims UK R&D tax
incentives under both the SME and RDEC schemes. During 2020, a
payment of GBP1.50 million was received from HMRC in respect of the
RDEC and SME tax claim for the year ended 31 December 2019. The
research and development tax credit receivable of GBP1.15 million
as at 31 December 2020 includes a current year SME claim of GBP0.36
million and a current year RDEC claim of GBP0.78 million (recorded
in other income).
14. 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.
2020 2019
GBP'000 GBP'000
(Loss) from continuing operations (10,791) (5,739)
Total (10,791) (5,739)
------------------------------------------------------- ------------ ------------
Weighted average number of Ordinary Shares in issue 599,920,207 165,081,000
Earnings per share from continuing operations (1.80p) (3.48p)
(b) Diluted
Due to the losses in the periods the effect of the share options
and warrants noted below were considered to be anti-dilutive.
Details of share options and warrants are given in note 32.
2020 2019
Potential dilutive ordinary shares:
Options 9,516,111 12,706,964
Warrants 4,185,248 6,744,500
------------------------------------- ----------- -----------
Total 13,701,359 19,451,464
------------------------------------- ----------- -----------
15. Dividends
There were no dividends paid or proposed by the Company in
either year.
16. Property, plant and equipment
Group Leasehold Plant & Fixtures & Total
Improvements Machinery Fittings
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------------- ----------- ----------- ---------
Cost
At 1 January 2020 - - 715 715
Transfer in from hVIVO 1,535 2,520 1,190 5,245
Additions 88 373 357 818
Disposals (1,014) - (324) (1,338)
Exchange differences 77 146 107 330
------------------------- -------------- ----------- ----------- ---------
At 31 December 2020 686 3,039 2,045 5,770
------------------------- -------------- ----------- ----------- ---------
Depreciation
At 1 January 2020 - - 525 525
Transfer in from hVIVO 1,497 2,455 1,037 4,989
Charge for the year 33 35 131 199
Elimination on disposal (1,014) - (297) (1,311)
Exchange differences 74 138 88 300
At 31 December 2020 590 2,628 1,484 4,702
------------------------- -------------- ----------- ----------- ---------
Net book value
At 31 December 2020 96 411 561 1,068
------------------------- -------------- ----------- ----------- ---------
At 31 December 2019 - - 190 190
------------------------- -------------- ----------- ----------- ---------
The Company had no property, plant and equipment at 31/12/2020.
(2019: nil).
17. Intangible fixed assets
Group Intellectual Capitalised Pref right to
Property Software reserve slot
Goodwill Trade secrets Rights development Licences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
Cost
At 1 January
2020 4,210 600 - - - - 4,810
Transfer in from
hVIVO - - 2,118 2,199 64 - 4,381
Additions 2,779 - - - - 274 3,053
Disposals - - - - - -
Exchange
Differences 239 33 - - - - 272
At 31 December
2020 7,228 633 2,118 2,199 64 274 12,516
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
Amortisation
At 1 January
2020 1,539 396 - - - - 1,935
Transfer in from
hVIVO - - 2,118 2,057 - - 4,175
Charge for the
year - 53 - 70 - 46 169
Disposals - - - - - - -
Exchange
Differences 89 21 - - - - 110
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
At 31 December
2020 1,628 470 2,118 2,127 - 46 6,389
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
Net book value
At 31 December
2020 5,600 163 - 72 64 228 6,127
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
At 31 December
2019 2,671 204 - - - - 2,875
----------------- --------- -------------- --------------- --------------- --------- ---------------- ---------
Goodwill was 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.
2020 2019
GBP'000 GBP'000
CRO 2,821 2,671
CDS 2,779 -
Data Platform - -
--------------- -------- --------
Total 5,600 2,671
--------------- -------- --------
On 17(th) January 2020, Open Orphan Plc acquired hVIVO Plc (now
renamed hVIVO Ltd) for a consideration of GBP12.96m. The difference
between the fair value of the assets acquired and the consideration
paid gave rise to goodwill of GBP2.8m being created on the
acquisition.
Goodwill is tested for impairment at the balance sheet date. The
recoverable amount of goodwill at 31 December 2020 was assessed at
GBP5,600k (2019: GBP2,671k) on the basis of value in use. An
impairment loss was not recognised as a result of this review.
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 two years were used followed by an
extrapolation of expected cash flows at a constant growth rate for
a further seven 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 2020
were as follows:
Longer-term growth rate (from 2022 onwards) 5%
Discount rate 15%
---------------------------------------------- ----
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 ten 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.
The Company has no intangible assets.
18a. Investments in subsidiaries
Company 2020 2019
Shares in Group undertakings GBP'000 GBP'000
---------------------------------------------- -------- --------
At 1 January 8,195 -
Transfer re Open Orphan PLC - 2,783
Investment in Open Orphan DAC - 5,412
Investment in hVIVO Plc 14,161 -
Impairment of Investment in VLS Germany GmbH (22) -
---------------------------------------------- -------- --------
At 31 December 22,334 8,195
---------------------------------------------- -------- --------
Investments in Group undertakings are recorded at cost, which is
the fair value of the consideration paid. Following review an
impairment provision of GBP22k (2019: nil) has been made to the
investment in subsidiaries.
The subsidiaries of Open Orphan Plc are as follows:
Name of Company Country of Registration Nature of Business
Venn Life Sciences Limited* Ireland Intermediate holding company
Venn Life Sciences (Ireland) Ireland Group Service company
Limited**(2)
Venn Life Sciences B.V.** Netherlands Clinical Research Organisation
Venn Life Sciences UK England & Wales Clinical Research Organisation
Limited**(1)
Venn Life Sciences (NI) England & Wales Clinical Research Organisation
Limited*
Venn Life Sciences (Germany) Germany Clinical Research Organisation
Gmbh *
Venn Life Science (France) France Data Management & randomisation
S.A.S.* Systems
Venn Life Sciences (EDS) Netherlands Pre-clinical & early clinical
B.V.* Research Organisation
Open Orphan DAC* Ireland Data Platform of Rare diseases
hVIVO Limited* England & Wales Intermediate holding company
hVIVO Services Limited** England & Wales Clinical development services
hVIVO INC** USA Sales & Marketing services
*100% Direct Ordinary Shareholding; **100% Indirect Ordinary
shareholding
(1) Company dissolved post year end; (2) Company in process of
being dissolved post year end.
All the subsidiaries are included in the consolidation. The
proportions of voting shares held by the parent Company do not
differ from the proportion of Ordinary Shares held.
18b. Investments in associates
The group, via its holding in hVIVO Limited, has investments in
two associated companies as follows:
Name of Company Country of Registration Nature of Business
Imutex Ltd (1) England & Wales Clinical development services
PrEP Biopharm Limited England & Wales Clinical development services
(2)
(1) hVIVO Limited owns 49% of the Ordinary Shares and the
investment is valued at GBP7,076,000 at 31 December 2020 after
adjusting for share of loss in 2020 of GBP107,000.
(2) hVIVO Limited owns 62.62% of Ordinary Shares and in 2018 the
carrying value was fully impaired so the investment has a value of
Nil at 31 December 2020.
18c. Investments in Integumen Plc
Group Group Company Company
Shares in undertakings 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
At 1 January - - - -
Transfer re Open Orphan PLC - 597 - -
Sales Proceeds - (514) - -
Loss on disposal - (83) - -
At 31 December - - - -
---------------------------- -------- -------- -------- --------
Venn Life Sciences Limited 's holding in Integumen PLC ordinary
shares with a market value of EUR597k, at the date of the reverse
takeover, were sold in July 2019 for GBP514k (net of
commission).
18d. Other impairments of investments
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- -------- -------- --------
At 1 January - - - -
Transfer re Open Orphan PLC - 141 - 26
Impairment - (141) - (26)
At 31 December - - - -
----------------------------- --------- -------- -------- --------
A decision to impair in full some balances transferred from the
Venn Group was made due to uncertainty over recoverability. These
balances were held in Investments (See note 18e below), Trade
debtors and Prepayments.
18e. Investment in Arcis Biotechnology
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Beginning of the year 26 26
Impairment - (26) - (26)
----------------------- --------- -------- -------- --------
End of the year - - - -
----------------------- --------- -------- -------- --------
At 2019 year-end a provision was made against the value of the
investment, which consisted of a minority shareholding in Arcis
Biotechnology Holdings Limited, a privately held company operating
in the biotechnology industry.
19. Financial instruments by category
(a) Assets
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------
31 December
Assets as per balance sheet
Trade and other receivables 9,462 3,290 10,847 5,452
Cash and cash equivalents 19,205 1,037 8,689 421
Total 28,667 4,327 19,536 5,873
----------------------------- -------- -------- -------- --------
Assets in the analysis above are all categorised as 'other
financial assets at amortised cost' for the Group and Company.
(b) Liabilities
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------
31 December
Liabilities as per balance sheet
Borrowings 359 1,702 45 1,250
Lease Liabilities (Note 37) 4,439 1,426 - -
Trade and other payables 6,376 2,229 885 1,357
Total 11,174 5,357 930 2,607
---------------------------------- -------- -------- -------- --------
Liabilities in the analysis above are all categorised as 'other
financial liabilities at amortised cost' for the Group and
Company.
(c) Credit quality of financial assets
The Group is exposed to credit risk from its operating
activities (primarily for trade receivables and other receivables)
and from its financing activities, including deposits with banks
and financial institutions, foreign exchange transactions and other
financial instruments.
The Group's maximum exposure to credit risk, due to the failure
of counter parties to perform their obligations as at 31 December
2020 and 31 December 2019, in relation to each class of recognised
financial assets, is the carrying amount of those assets as
indicated in the accompanying balance sheets.
Trade receivables
The credit quality of trade receivables that are neither past
due date nor impaired have been assessed based on historical
information about the counterparty default rate. The Group does not
hold any other receivable balances with customers, whose past
default has resulted in the non-recovery of the receivables
balances.
Cash at bank
The credit quality of cash has been assessed by reference to
external credit ratings, based on reputable credit agencies'
long-term issuer ratings:
2020 2019
Rating GBP'000 GBP'000
-------------- -------- --------
A - AAA 19,158 1,032
Sub-A rating 47 5
Total 19,205 1,037
-------------- -------- --------
The balance categorised as Sub-A rating is a deposit held with
Allied Irish Banks p.l.c. (Guaranteed by Irish government as key
shareholder).
20. Inventories
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Beginning of the year - - - -
Laboratory and clinical consumables 168 - - -
------------------------------------- -------- -------- -------- --------
Virus - finished goods 785
------------------------------------- -------- -------- -------- --------
End of the year 953 - - -
------------------------------------- -------- -------- -------- --------
GBP925,000 of stock was acquired by the group on the acquisition
of the hVIVO group on 17(th) January 2020.
Inventories expensed in the consolidated statement of
comprehensive income are shown within Direct Project and
administrative costs. All inventories are carried at the lower of
cost or net realisable value in the consolidated statement of
financial position. No provision against inventories was required
during 2020.
21. Trade and other receivables
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- -------- --------
Trade receivables 6,143 1,573 - -
Less: provision for impairment of trade - - - -
receivables
------------------------------------------ -------- -------- -------- --------
Trade receivables - net 6,143 1,573 - -
Prepayments and accrued income (Note 35) 2,064 1,711 112 73
Amounts owed by subsidiary undertakings - - 10,778 5,014
Other receivables 1,599 331 70 442
9,806 3,615 10,960 5,529
------------------------------------------ -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
The carrying amounts of the Group's trade and other receivables
denominated in foreign currencies were as follows:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- -------- --------
UK Sterling 5,481 76 2,756 391
Euros 4,325 3,539 8,204 5,138
9,806 3,615 10,960 5,529
------------- -------- -------- -------- --------
22. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes
of the statement of cash flows:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- -------- --------
Cash at bank and on hand 19,205 1,037 8,689 421
Cash and cash equivalents (excluding bank
overdrafts) 19,205 1,037 8,689 421
------------------------------------------- -------- -------- -------- --------
The Group's cash and cash equivalents are held in
non-interest-bearing accounts. The Directors consider that the
carrying amount of cash and cash equivalents approximates to their
fair value.
23. Trade and other payables
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- -------- -------- --------
Trade payables 4,954 507 72 33
Amounts due to subsidiary undertakings - - 543 964
Social security and other taxes 446 562 - -
Other payables * 301 347 64 92
Accrued expenses and deferred income 15,697 1,603 206 270
21,398 3,019 885 1,359
---------------------------------------- -------- -------- -------- --------
GBP2,000 of other payables are due after one year after year end
2020 (2019: GBP42,000). All other balances are due within 1
year.
24. Deferred income tax
Deferred tax balances were as follows:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------- -------- -------- --------
Deferred tax liabilities were made up as follows:
Accelerated tax depreciation 32 41 - -
32 41 - -
--------------------------------------------------- -------- -------- -------- --------
Deferred tax assets
Deferred income tax assets are recognised to the extent that the
realisation of the related tax benefit through future taxable
profits is probable. There was no deferred tax asset recognised for
the Company. The gross movement on the deferred income tax account
is as follows:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------
At 1 January 41 - - -
Transfer re Open Orphan PLC - 108
Income statement movement (note 13) (9) (67) - -
------------------------------------- -------- -------- -------- --------
At 31 December 32 41 - -
------------------------------------- -------- -------- -------- --------
25. Borrowings
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- -------- -------- --------
Current - falling due within 1 year
Loan Notes 45 1,250 45 1,250
Convertible debenture securities("CDS") 314 297 - -
Invoice Discounting - 156 - -
Total borrowings 359 1,703 45 1,250
----------------------------------------- -------- -------- -------- --------
The Company and Group do not have bank borrowings. All
Borrowings due within one year.
Venn Life Sciences Limited entered into an invoice discounting
arrangement with Capital Flow in November 2018 to help improve cash
flow for that company. The facility was repaid in full by end of
June 2020 and fully closed by end of August 2020.
Therefore, at 31 December 2020 a balance of nil (2019: EUR156k)
had been drawn down from Capital Flow. Capital flow released the
registered fixed and floating charge over the trade debtors balance
in Venn Life Sciences Limited on closure of the facility.
Loan Notes for GBP1m issued on 11 December 2018 with a two-year
term and a 10% coupon rate were available for redemption in Dec
2020. All but one loan note for GBP45k was redeemed by 31 Dec 2020.
The final loan note was redeemed in February 2021.
Loan Notes for GBP250k issued on 6 April 2019 with a 13-month
term and an 8% coupon rate were redeemed in full in March 2020.
There are 2 remaining Convertible debenture securities holders
and they are entitled to interest of 7% per annum on their
securities. Neither of these CDS holders chose to convert their
securities into Ordinary shares in Open Orphan DAC at the time of
the reverse takeover of the Venn Group in June 2019. Consequently,
these CDS holdings can be redeemed by the company at any time from
June 2020 up to March 2022. Following reverse acquisition, the
holders lost their right to convert.
26. Share capital
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------ -------- -------- -------- --------
668,052,261 (2019 - 254,572,567) Ordinary
shares of GBP0.001 668 254 668 254
62,833,339 (2019 - 62,833,339) Deferred shares
of GBP0.001 63 63 63 63
Total 731 317 731 317
------------------------------------------------ -------- -------- -------- --------
Deferred shares have no rights to income, capital or voting and
the Company has the right to acquire all such shares for an
aggregate price of GBP1.
During the year the Company issued 413,479,694 shares.:
191,049,807 GBP0.068/share
86,885,253 GBP0.061/share
16,897,031 GBP0.001/Share
1,653,214 GBP0.022/Share
2,172,565 GBP0.02/Share
114,821,824 GBP0.11/Share
27. Other reserves
Group and Company
Share Premium
Share premium is the difference between the nominal value of
share capital and the actual cash received on fund-raising less any
costs associated with the fund-raising.
Merger Reserves
This includes reverse acquisition reverse which resulted from
the reverse acquisition of Venn Life Sciences Holdings Plc by Open
Orphan DAC on 28 June 2019. See note 2 (d). Also includes a Group
re-organisation reserve relating to previous re-organisation of the
Old Venn Group.
Foreign Currency Reserve
The presentation currency of the group became GBPGBP in 2020.
Previously the presentation currency was Euro. (See note 38). This
reserve arises from the translation of the opening balance sheet
balances from Euro to GBPGBP and also from the translation of the
subsidiaries which are denominated in Euro into GBPGBP on
consolidation.
The Euro denominated subsidiaries are Venn Life Sciences
Limited, Venn Life Sciences (Ireland) Ltd, Venn Life Sciences
Germany GmbH, Venn Life Sciences France S.A.S, Venn Life Sciences
B.V, Venn Life Sciences E.D. B.V. and Open Orphan DAC. Hence the
Foreign Currency Reserve arises.
Share Option Reserve
A share option reserve of GBP151,000 was created in June 2019,
prior to the reverse takeover of Venn Life Sciences Holdings PLC by
OO DAC, in relation to the share options and warrants issued in
June 2019. A further provision of GBP102,000 was made after the
reverse takeover in 2019. In 2020 a provision of GBP240,000 was
made.
Retained Earnings
For Group and Company, retained earnings brought forward reflect
the retained earnings of OO DAC prior to the reverse takeover of
Venn Life Sciences Holdings PLC by OO DAC plus the combined
earnings of OO DAC and Venn Life Sciences Holdings PLC (now renamed
Open Orphan PLC) from date of reverse acquisition on 26(th) June
2019 to year end 2019.
For Group and Company, earnings for the current year reflect the
earnings of Open Orphan Plc including Open Orphan DAC for the full
year plus the earnings of hVIVO Group from date of acquisition
17(th) January 2020 to year end 2020.
28. Cash used in operations
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- --------- -------- -------- --------
Loss before income tax (11,163) (5,824) (1,891) (1,629)
Adjustments for:
- Depreciation and amortisation
(Note 6) 2,052 627 - -
- Foreign currency translation
of net assets 97 - 37
- Exceptional Items (Note 7) 2,125 711 867 711
- Net finance costs/(Income)
(Note 12) 374 350 (651) (346)
- Share based payment expense
(Note 32) 240 102 50 102
- R & D Credit incl. in other
Income (778)
- Share of Imutex loss (Note
18.b) 107 - - -
Changes in working capital
- Losses/Impairments on Investments
(Note 18c/18d) - 224 22 26
- Lease Payments (Note 37) (1,999) (270) - -
- Transfer re Open Orphan PLC - (1,655)
- (Increase)/Decrease Trade and
other receivables (2,800) 1,857 (4,491) -
- (Increase)/Decrease Inventories (28) - - -
- (Decrease)/Increase Trade and
other payables 14,410 (637) (474) -
------------------------------------- --------- -------- -------- --------
Net cash used in operations 2,540 (2,763) (6,568) (2,754)
------------------------------------- --------- -------- -------- --------
29. Related Party Disclosures
Directors
Directors' emoluments are set out in the Report of the
Remuneration Committee Report.
Key management compensation for the year was as follows:
2020 2019
EUR'000 EUR'000
----------------------------------------- -------- --------
Aggregate emoluments 576 326
Employer contribution to pension scheme 20 13
596 339
----------------------------------------- -------- --------
Key management includes the Directors only.
Group
On 10 November 2016 the group signed a contract worth EUR2.5m
with Sedana Medical AB ("Sedana Medical").
The then CEO of Sedana Medical, Michael Ryan, was also a
director of Venn Life Sciences at that time. Accordingly, Michael
Ryan was a related party of Venn Life Sciences as defined in the
AIM Rules and ESM Rules. As a result, the contract is treated as a
"related party transaction" under the AIM Rules and the ESM
Rules.
The Independent Directors, at that date, being Allan Wood,
Anthony Richardson, Jonathan Hartshorn, Gracielle Schutjens,
Cornelius Groen, Paul Kennedy and Mary Sheahan, who are not related
parties under the AIM Rules and ESM Rules for the purpose of the
contract, having consulted with Davy, the Company's NOMAD and ESM
adviser, for the purpose of the AIM Rules and ESM Rules, considered
the contract to be fair and reasonable insofar as the shareholders
of the Company are concerned. Michael Ryan did not take part in the
Board's consideration of these matters. Michael Ryan resigned as a
director on 17(th) January 2020.
Executive Group Chairman, Cathal Friel, held a share of
GBP108,642 of the GBP1m loan note issued in December 2018 through
his pension vehicle. This loan note was redeemed in full in
December 2020. Cathal Friel also held all of the GBP250,000 loan
note issued in April 2019. This loan note was redeemed in full in
April 2020. Gross Loan note interest of GBP15,000 (2019: GBP25,000)
was due in 2020. All loan note interest was paid on redemption.
Cathal Friel is also a director of Raglan Road Capital Ltd which
rents office space and provides advisory and office related
services to Open Orphan DAC (2020 charge EUR108,000; 2019 charge
EUR97,000). Balance owed by Group to Raglan Road Capital Ltd at
year end 2020 was EUR3,780 (2019: EUR324,204).
There were no other related party transactions during the
year.
The Company
During the year the Company absorbed net management charges of
EUR324,475 (2019 - GBP337,923) from its subsidiaries. At 31
December 2020 the Company was owed EUR10,234,000 (2019 -
GBP4,420,000) by its subsidiaries.
30. Capital commitments
The Group had no capital commitments at 31 December 2020 or at
31 December 2019.
31. Discontinued Operations
A decision to close the clinical operations division across
Europe was made during 2020 and Venn Life Sciences (NI) Ltd, Venn
Life Sciences B.V. and Venn Life Sciences Germany GmbH have
consequently ceased to trade from 1 January 2021 onwards.
Arrangements to dissolve these companies and other dormant
companies Venn Life Sciences UK Ltd and Venn Life Sciences
(Ireland) Ltd will be undertaken over the course of 2021. There
were no discontinued operations during 2019.
32. Share options and warrants
The Group has share option plans under which it grants share
options to certain Directors and senior management of the
Group.
Some share options have vested. Some share options have been
forfeited as a result of the Director or employee leaving the Group
before options vested.
Number of outstanding share options remaining at 31 December
2020:
Date of Grant # Options Options Transferred # of Options # of Options # Options
at from hVIVO Exercised Forfeited at 31/12/2020
01/01/2020 Ltd
28/01/2015 1,680,000 - - 1,400,000 280,000
------------ -------------------- ------------- ------------- ---------------
14/09/2017 3,310,000 - - 3,310,000 -
------------ -------------------- ------------- ------------- ---------------
28/06/2019 7,716,964 - - - 7,716,964
------------ -------------------- ------------- ------------- ---------------
17/01/2020 - 3,742,147 2,172,565 50,435 1,519,147
------------ -------------------- ------------- ------------- ---------------
Total 12,706,964 3,742,147 2,172,565 4.760.435 9,516,111
------------ -------------------- ------------- ------------- ---------------
The weighted-average exercise price of all options outstanding
at year end is 5.2p and weighted-average remaining contractual life
is 2.6 years.
The pricing and vesting criteria of the share options in
existence at 31 December 2020 are as follows:
In relation to the Options granted in 2015:
Options in issue 31/12/2020 280,000
Exercise price (in equal thirds
when price 25p/35p/45p) 13p
Expected volatility 28%
Expected dividend 0%
Contractual life 2.5 years
Risk free rate 95%
Estimated fair value of each GBP0.00
option
In relation to the Options granted in 2019:
Options in issue 31/12/2020 7,716,964
Exercise price 5.6p
Expected volatility 60%
Expected dividend 0%
Contractual life 3.5 years
Risk free interest rate 1.84%
Estimated fair value of each GBP0.02
option
In relation to the Options granted in 2020:
Options in issue 31/12/2020 1,519,147
Exercise price 2p
Expected volatility 72.8%
Expected dividend 0%
Contractual life 2 years
Risk free interest rate 0.57%
Estimated fair value of each GBP0.04
option
Charge for year was EUR240,000 (2019 - GBP102,000). The shares
granted in 2020 resulted from the exchanging of hVIVO Plc options
for Open Orphan plc options when the acquisition of the hVIVO group
occurred in January 2020.
A share option reserve (GBP151,000) was created before the
reverse takeover by Open Orphan DAC in 2019 in relation to the
shares and warrants granted in June 2019. A further charge was made
of EUR102,000 to year end 2019 bringing total reserve to
GBP253,000.
The share options granted in 2015 have no value given the
vesting conditions when issued.
The Company has used the Black Scholes model to value the
options at 31 December 2020. This method simulates a range of
possible future share price scenarios and calculates the average of
net present value of the option across those scenarios and which
captures the effect of the market-based performance conditions
applying to such awards. The expected volatility was calculated
with refence to historic share price movements.
Warrants
4,185,248 warrants existed at 31 December 2020 (2019:
6,744,500).
166,666 warrants were granted on 7 June 2011 and exercisable
from the date of grant to 6 June 2021. The exercise price was
EUR0.353 (30p) per ordinary share under warrant.
853,709 warrants were granted on 11 December 2018 and are
exercisable from the date of grant to 10 December 2023. The
exercise price is 0.1p per ordinary share under warrant. 1,557,731
warrants were granted on 11 December 2018 and are exercisable from
the date of grant to 10 December 2023. The exercise price is 2.2p
per ordinary share under warrant.
1,607,142 warrants were granted on 28 June 2019 and are
exercisable from the date of grant to 27 June 2024. The exercise
price was 5.6p per ordinary share under warrant.
33. Other operating income
Other operating income represents government grants received to
fund Research and Development activities around the group. Other
income includes GBP0.8 million (2019: nil) accrued in respect of a
Research and Development Expenditure Credit ("RDEC") claim for 2020
by the Company, hVIVO Services Limited, which classifies such RDEC
claims as a government grant where amounts receivable as
compensation for expenses or losses already incurred are recognised
in the statement of comprehensive income in the period in which
they become receivable.
34. Post balance sheet events
The following events have taken place since the year end:
a) Open Orphan plc (on a stand-alone basis) successfully
received the appropriate Court approval on 19 May 2021 to complete
a reduction in in capital. The reduction was intended to enable a
Distribution in Specie, as part of the proposed spin-out of certain
non-core Development IP Assets, but also to make other
distributions to Shareholders and/or buy back its own Open Orphan
Ordinary Shares in the future if and when the Directors may
consider that it is appropriate to do so.
b) For the purposes of a proposed spin-out of certain non-core
Development IP Assets, a new wholly owned subsidiary, Orph Pharma
IP Company Limited ("Orph Pharma"), was registered in April
2021.
c) On 14 June 2021, the Group announced its intention to make a
distribution in specie of the entire issued share capital of its
wholly-owned subsidiary Orph Pharma IP Company Limited to Poolbeg
Pharma Limited ("Poolbeg"), in return for the issue of new shares
by Poolbeg ("Poolbeg Shares") to shareholders of Open Orphan on the
register at close of business on 17 June 2021.
35. Revenue, Assets and Liabilities related to contracts with
customers
(a) Clinical Development Services
The group carries out its activities through hVIVO Services
Limited in the United Kingdom. All revenue from contracts with
customers is derived from activities undertaken in the UK.
During the period ended 31 December 2020, the Company had four
customers who each generated revenue greater than 10% of total
revenue which was GBP13m. These customers generated 27%, 24%, 16%
and 16% of revenue respectively.
GBP1.8 million of revenue from contracts with customers
recognised during the year was included in the opening balance of
contract liabilities on acquisition of the group.
The value of contract liabilities has increased from GBP1.9
million on acquisition to GBP14.5 million at 31 December 2020.
Contract assets have increased from GBP0.2 million on acquisition
to GBP0.8 million at 31 December 2020.
Net accrued income, related to contracts with customers in
CDS
2020
Total
GBP'000
----------------------------------------------------------- -------------
Net Accrued Income brought -
forward
--------------------------------------------------------- ---- ---------
Net Accrued Income acquired on acquisition of hVIVO
group (1,689)
----------------------------------------------------------- -------------
Movement in the period:
* arising from a change in the measure of progress (12,014)
----------------------------------------------------------- -------------
Net Accrued Income as at 31 December 2020 (13,703)
Split:
Accrued Income 821
Deferred Income (14,524)
----------------------------------------------------------- -------------
Net Accrued Income (13,703)
----------------------------------------------------------- -------------
The majority of the contract liabilities balance is expected to
be recognised within six months, as follows:
Analysis of expected realisation of revenue within contract
liabilities
31 December
2020
GBP'000
-------------------------------- -----------
Within six months 14,469
Between six months and one year 55
After one year -
-------------------------------- -----------
14,524
-------------------------------- -----------
Generally, contract milestones are timed so as to result in
invoicing occurring in advance, prior to the satisfaction of
performance obligations. Therefore, projects that are in progress
are typically in a contract liability position. Performance
obligations of contracts with customers are satisfied on the
delivery of study data to the customer along with a final study
report. Due to the nature of the business there are no warranties
or refunds expected or provided for. Contractual payment terms are
typically 30 to 45 days from date of invoice.
The Company considers whether there are other promises in the
contract that are separate performance obligations to which a
portion of the transaction price needs to be allocated. The
Company's data and intellectual property may be made available to
the client but solely to the extent that this is necessary to the
satisfaction of the client contract. This is not considered a
distinct performance obligation but an obligation in conjunction
with the client study. Therefore, the full transaction price is
allocated to performing the client study.
The Company is using the practical expedient not to adjust the
amount of consideration for the effects of a significant financing
component due to the fact that the period between when the promised
services are transferred and when the customer pays for the service
is less than twelve months. The entity does not, in the normal
course of business, incur incremental costs to obtain a contract
and has therefore not recognised any assets in this regard.
(b) Clinical Research Organisation
The group derives revenues from external customers from the
provision of Clinical consulting services and drug development
services split into various service offerings across various
geographical regions.
Venn Life Sciences E.D B. V, based in Breda in the Netherlands,
provides Early clinical, Non-Clinical and CMC services to a wide
variety of customers and revenue in 2020 was GBP5m.
Venn Life Sciences France S.A.S, based in Paris, France and Venn
Life Sciences Ltd, based in Ireland, provide Data management, Bio
Statistics, Medical Methodology and Randomisation services. Revenue
in 2020 was GBP2m.
Venn Life Sciences Germany GmbH, Venn Life Sciences NI Ltd and
Venn Life Sciences B.V. based in Germany, Northern Ireland and the
Netherlands respectively, provided clinical services in 2020 with
combined Revenue of GBP0.6m but as per Note 31 a decision to close
the Clinical operations across the group was taken in H1 2020 and
these companies are no longer trading in 2021.
Net accrued income, related to contracts with customers in
CRO
2020 2019
Total Total
GBP'000 GBP'000
----------------------------------------------------------- --------- --------
Net Accrued Income brought forward 601 -
----------------------------------------------------------- --------- --------
Net Accrued Income acquired on acquisition
of Venn Life Sciences group - 1,571
---------------------------------------------------------- ---------- --------
Movement in the period:
* arising from a change in the measure of progress (219) (970)
----------------------------------------------------------- --------- --------
Net Accrued Income carried forward 382 601
Split:
Accrued Income 900 1,389
Deferred Income (518) (788)
----------------------------------------------------------- --------- --------
Net Accrued Income 382 601
----------------------------------------------------------- --------- -----------
The costs incurred to obtain or fulfil a contract which has been
recognised as contract assets have been determined with reference
to labour hours incurred to the period end as a percentage of the
total estimated labour hours to complete specified performance
obligations as stipulated by the relevant contracts. Contract
assets are not amortised as they are of a short- term nature.
36. Pensions
The Group operates a number of defined contribution pension
schemes whose assets are held separately from those of the Group in
independently administered funds. The pension charge represents
contributions payable by the Group and amounted to GBP861,000 for
the year (year ended 31 December 2019: GBP278,000). Contributions
totalling GBP25,000 were payable to the funds at the year end and
are included within trade and other payables (31 December 2019:
GBP36,000).
37. Leases
Amounts recognised in the statement of financial position
Right of use assets Lease liabilities
GBP'000 GBP'000
---------------------------- -------------------- ------------------
As at 1 January 2020 1,311 1,427
Transfer from hVIVO Group 3,051 3,213
New Leases Acquired 1,479 1,479
Depreciation expense (Note
6) (1,684) -
Interest expense (Note 12) - 243
Payments (Note 28) - (1,999)
Exchange differences 73 76
As at 31 December 2020 4,230 4,439
Current - 2,245
Non-current 4,230 2,194
----------------------------- ----------------------------------------
Maturity of leases
31 December
2020
GBP'000
---------------------------------------- -----------
Current - Within one year 2,245
Non-Current - Between one to two years 1,510
Non-Current - Between two to five years 684
4,439
---------------------------------------- -----------
Short-term Lease payments expensed in year ended 31/12/20:
GBP25,000 (2019: GBP17,000).
38. Presentation Currency change
As specified in Note 1 and 2, the Board decided to change the
presentation currency of the Group from Euro (EUR) to pounds
Sterling (GBP) in 2020, given the increased weighting of the UK
operations in the Financial Statements as a result of the merger
between Open Orphan plc and hVIVO plc in January 2020. As a result
of this change the Company has restated the comparative period as
follows:
Group Company
Group Company
2019 2019 2019 2019
GBPGBP'000 EUREUR'000 GBPGBP'000 EUREUR'000
------------------------------- ----------- ----------- ----------- -----------
Assets
Non-current assets
Intangible assets 2,875 3,380 - -
Property, plant and equipment 190 223 - -
Investment in associates - - - -
Investments in subsidiaries - - 8,195 9,634
Right of Use Asset 1,311 1,541 - -
Total non-current assets 4,376 5,144 8,195 9,634
-------------------------------- ----------- ----------- ----------- -----------
Current assets
Inventories - - - -
Trade and other receivables 3,615 4,250 5,529 6,500
Current Tax recoverable 12 14 - -
Cash and cash equivalents 1,037 1,219 421 495
Total current assets 4,664 5,483 5,950 6,995
-------------------------------- ----------- ----------- ----------- -----------
Total assets 9,040 10,627 14,145 16,629
-------------------------------- ----------- ----------- ----------- -----------
Equity attributable to owners
Share capital 317 372 317 372
Share premium account 15,214 19,041 15,214 19,041
Merger reserves (6,856) (8,060) (2,241) (2,635)
Foreign currency reserves 1,124 (102) 1,085 -
Share option reserve 253 298 253 298
Retained earnings (7,202) (8,199) (3,092) (3,513)
-------------------------------- ----------- ----------- ----------- -----------
Total equity 2,850 3,350 11,536 13,563
-------------------------------- ----------- ----------- ----------- -----------
Liabilities
Non-current liabilities
Trade and other payables 42 49 - -
Lease liabilities 983 1,156 - -
Provisions - - - -
Total non-current liabilities 1,025 1,205 - -
-------------------------------- ----------- ----------- ----------- -----------
Current liabilities
Trade and other payables 2,977 3,500 1,359 1,597
Deferred taxation 41 48 - -
Lease liabilities 444 522 - -
Borrowings 1,703 2,002 1,250 1,469
Total current liabilities 5,165 6,072 2,609 3,066
-------------------------------- ----------- ----------- ----------- -----------
Total liabilities 6,190 7,277 2,609 3,066
-------------------------------- ----------- ----------- ----------- -----------
Total equity and liabilities 9,040 10,627 14,145 16,629
-------------------------------- ----------- ----------- ----------- -----------
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