Source - RNS
RNS Number : 8958G
Integumen PLC
02 June 2017
 

 

Integumen plc

 

("Integumen" or the "Group")


FINAL RESULTS

 

Integumen (LSE: SKIN), the personal health care company developing and commercialising technology and products for the human integumentary system today announces its final results for the period ended 31 December 2016.

 

Performance Highlights

 

·      2016 has been a year of transformation as the Group has successfully acquired and integrated three businesses in the period under review, with one further acquisition in 2017, to create a strong product portfolio within skincare, oral care and wound care;

·      Now focused on commercialising product portfolio, technologies and associated know-how in identified and growing markets:

Two product ranges are already on the market; The TS1 tongue sanitiser and Labskin which is a human skin equivalent technology targeting the cosmetic product testing sector;

Signed a strategic supply agreement with Mono Dent, a leading distributor of oral hygiene products in South Korea, with the exclusive rights to distribute three products under the TSpro brand.

 

Financial Results for the period ended 31 December 2016

 

·      Revenues of £52,062 with administrative costs of (£1,066,424), reflecting the continued investment in the development of the Labskin business;

·      Operating loss of (£1,077,078);

·      As at 31 December 2016 the Group had total assets of £4,996,166.

 

Since the period end, the Group raised £2.25m through our flotation on AIM of the London Stock Exchange in April 2017, which will be used for product development, sales & marketing and working capital.

 

 

Declan Service, CEO of Integumen, said:

 

"Our successful listing on AIM is a significant milestone for this young Company, and provides us with the platform we need to grow the business. With the strong Board and senior management team we have assembled, the Group's priority is to commercialise our products, and deliver on the strategy we set out to our shareholders during the IPO. We have the solid foundations from which to build an exciting business in the medium to long-term, and I look forward to updating the market as we progress."

 

 

Integumen plc

Declan Service, CEO

 

+ 353 (0) 87 770 5506  

SPARK Advisory Partners Limited

(Nominated Adviser)

 

Neil Baldwin/Sean Wyndham-Quin

+44 (0) 113 370 8974

Turner Pope Investments (TPI) Ltd

 

Ben Turner/James Pope

 

+44 (0) 20 3621 4120

Cardew Group

Shan Shan Willenbrock

David Roach

 

+44 (0) 20 7930 0777

[email protected]

 

 

 

Chairman's Statement

 

I am pleased to report our maiden results as a quoted company. Integumen was admitted to trading on the AIM market of London Stock Exchange plc on 5 April 2017, raising £2.25 million and I welcome our new shareholders to this exciting business. 

 

Our Business

Integumen Plc was incorporated and registered in England and Wales on 28 May 2016, and consists of four wholly-owned subsidiaries: UK-based Innovenn UK Limited and Lifesciencehub UK Limited, TSpro GmbH in Germany, and Integumen Inc. in the United States.  Integumen Plc ("Integumen" or "Company") is a personal health care company focused on developing and commercialising a range of innovative products in the oral, skin and wound care markets. 

 

The Group has a portfolio of products, two of which are generating revenue.  The remaining products are in late stages of development, with a skincare range planned for commercialisation in 2018. Our products are:

 

·      TS1, a tongue sanitiser designed for dental surgery and for home use

·      Labskin, a 3-dimensional human skin equivalent

·      Skincare

Cosmeceuticals for the anti-ageing market

Clarogel, over-the-counter cosmetic product for the treatment of blemishes

·      Woundcare, chronic wound diagnostic tool called Wound pHase and Hydrogel, a material used for the treatment of wounds

 

Further information on our products and technologies can be found in the Chief Executive's Report.

 

To date, approximately £15 million of investment has been made in total in the Group's products and technologies which are at the late stages of development, meaning the risk associated with commercialisation, such as the remaining cost of development, and timeframe to launch, is mitigated.  Additionally, our portfolio of products does not require traditional phases 1-4 clinical trials mitigating further commercial and clinical risks. 

 

Currently, our oral care business and Labskin (a human skin equivalent) are generating revenues and targeted at the B2B sector.  The Company is also developing additional products that will target the consumer sector in the skincare market. 

 

Our corporate offices are based in Ireland and the Company has a product research and development laboratory in York which has its own in-house staff of five people.  The Group outsources its manufacturing to third parties in order to preserve operating margins.

 

Corporate governance

I believe that good corporate governance is important to support our future growth and the Board, which has extensive experience in publicly listed companies and running companies in the personal healthcare sector, is committed to the highest standards.  

 

People

I would like to thank the Board and the whole team for their hard work and commitment, particularly during our listing process.  We have an excellent team who have the experience to deliver on our strategic objectives.  

 

Outlook

Integumen is a young company at the start of an exciting journey, and the Board and senior management team are enthusiastic about the medium to long-term prospects. We are operating in sectors that have significant market opportunities with a portfolio of quality products that are scalable. In the near term, we have the right team in place that is already commercialising two of these opportunities and will continue to bring more products to market. The outlook for the business is encouraging while we remain focused on building a sustainable business for the future, and we look forward to updating shareholders as we progress.

 

 

Tony Richardson

Chairman

 

 

Chief Executive's Statement

 

I am pleased to report Integumen Plc's first set of results since its admission to trading on the AIM market of the London Stock Exchange, an important milestone in the lifetime of this Company.

 

Highlights

During the listing process, we raised £2.25 million. After listing costs, the proceeds will be used on product development and sales & marketing and working capital. The Company is now focused on commercialising the portfolio of products, technologies and associated know-how it has assembled, which broadly focus on applications with identified and growing markets within skincare, oral care and wound care. As a Board, we took the strategic decision to diversify our range in order to provide Integumen with a portfolio approach that reduces the risk of any one product or technology.

 

Integumen already has two product ranges on the market; The TS1 tongue sanitiser and Labskin which is a human skin equivalent technology targeting the cosmetic product testing sector.

 

TS1 - Oral care

Integumen has developed TS1, a disposable tongue vacuum cleaner for professional use in the dental surgery, a tongue gel and a handle which turns the tongue vacuum cleaner into a tongue scraper for home use. It targets a growing segment of the global oral care market. TS1 enables the deep cleaning of the tongue and the removal of bacteria plaque from the oral cavity.  TS1 has specialist distributors who are already distributing the product, primarily TSpro to the B2B dentistry market in Germany, Austria, Switzerland, Italy, Denmark, Sweden, Norway, Slovakia and countries in the Middle East. 

 

In April 2017, the Company signed its first supply agreement in Asia with Mono Dent, a leading distributor of oral hygiene products to dental surgeries and dental universities in South Korea, for an initial period of three years. The agreement provides Mono Dent with the exclusive rights to distribute three products under the TSpro brand within South Korea. Opening orders have already been received, and as part of the exclusive agreement, Mono Dent has committed to a sales and marketing strategy for TS1 to penetrate further the South Korean market.  South Korea has approximately 20,000 dental surgeries and is a growing market driven by medical tourism and cosmetic dental surgery.

 

Labskin

The overarching global cell-based assays market is expected to reach nearly $21.6 billion by 2018 with a five year CAGR of 12.4 per cent. (Source: Cell Based Assays: Technologies and Global Markets, BCC Research), driven primarily by the reduction in or ban on using animals for testing cosmetics products.

 

Labskin is a 3-dimensional human skin equivalent model which has been designed for use in this space. It is used for basic and applied skin research, pre-clinical screening, microbial (bacterial) testing, and efficacy studies of personal care products. It is sold as both a consumable product to third parties, and a managed testing service conducting experiments from our facility in York. It made small scale commercial sales during 2016 to customers included GoJo, ONTEX and GlaxoSmithKline.

 

In March 2017, the Company entered a three-year OEM supply agreement with a European partner for the supply of Labskin. The Company is in discussions with R&D departments of a number of cosmetic and pharmaceutical companies, independent testing companies and academic institutions, driven in part by the EU ban on animal testing in cosmetics. 

 

Visible Youth

The global anti-ageing products market is expected to grow at a CAGR of 8 per cent., from $150 billion in 2015 to $192 billion in 2019 (Source: Anti-ageing Market: Global Industry Analysis and Opportunity Assessment 2015-2019, Future Market Insights), and the market for anti-wrinkle products is assessed at $77.7 billion in 2016 (Source: Anti-ageing Market: Global Industry Analysis and Opportunity Assessment 2015-2019, Future Market Insights). 

 

Visible Youth Consumer and Visible Youth Professional are a range of cosmeceuticals targeting this anti-ageing market.  Visible Youth is a brand whose first six consumer launch products will comprise a cleanser, toner, face serum, eye serum, moisturising cream with SPF20 and a night cream. We expect to launch it in 2018.

 

The professional products include products for use after skin rejuvenation procedures such as chemical peel or dermabrasion, and a number of other products are planned. Formulation patents are pending or granted, and trademarks registered, in various jurisdictions.  The Company is also considering partnering with more established cosmetic companies in order to achieve a presence in this market.

 

Clarogel

Skin blemishes are one of the most pervasive skin conditions in younger people: over 80 per cent. of adolescents and young adults are affected by this condition at some point. (Source: National Institute of Arthritis and Musculoskeletal and Skin Diseases).

 

Clarogel is an over-the-counter cosmetic product for the treatment of blemishes (non-medical treatment of symptoms of acne). It is a late stage product and historically the product has been the subject of a clinical study against a market leading product and demonstrated a greater reduction in inflamed lesions than the comparator after one month of use and significantly reduced sebum excretion.  Clarogel is patented in Europe and the United States.

 

Woundcare

The Company has developed an innovative chronic diagnostic tool called Wound pHase.  The polymer film in disc form is applied to a wound and surrounding skin in the same way as a traditional hydrogel dressing. Responding to the acidity/alkalinity of the wound, the disc changes colour within five minutes. The colorimetric response of the disc to the wound indicates the acidity/alkalinity and changing state of the wound bed in order to vary the appropriate treatment regime.

 

Hydrogel is a product the Company is exploring as a dressing for use in the treatment of burns. This will be conducted in parallel with the development of Wound pHase.

 

Results

The Company made an operating loss of (£1,077,078), based on revenues of £52,062, with administrative costs of (£1,066,424). 2016 has been a year of transformation for Integumen Plc, and as we progress through 2017 the Company will demonstrate its ability to commercialise products we added last year to the portfolio.

 

Strategy

Integumen has purposefully assembled businesses which possess products, technologies and know-how which are generally in advanced stages of development or at an early stage of commercialisation.

 

The Company aims to apply the Board's collective experience, market knowledge and contacts to demonstrate the commercial potential of these products, technologies and know-how in the most effective way, given its resources. This approach could involve:

·      Direct product sales by Integumen and its subsidiaries;

·      Product sales through marketing and distribution partners with existing and proven infrastructure; and/or,

·      Selectively seeking licensing partners, once value has been added through development activity, brand creation or early market adoption.

 

We look forward to updating you on the progress of this strategy as we go forward.

 

Outlook

The portfolio of products and technologies we have put together inside this young company, together with a strong Board and senior management team, provides us with a platform from which to build an exciting business in the medium to long-term. Our chosen sectors for commercialising our products are large, with clear opportunity for new innovative products and technologies.

We are already commercialising two of the products in our portfolio and by the end of 2017, more of our products will be on the market. The outlook is encouraging, our team is focused on building a sustainable business, and we look forward to updating shareholders in the future.

 

 

Declan Service

Chief Executive Officer

1 June 2017

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

 

 

2016

2015

 

Notes

£

£

Revenue

5

52,062

4,015

Costs of sales

 

(62,716)

-

Gross (loss)/profit

 

(10,654)

4,015

Administrative Costs

 

(1,066,424)

(416,074)

Operating loss

6

(1,077,078)

(412,059)

  Depreciation

6,16

33,747

20,584

  Amortisation

6,15

85,214

35,442

  Exceptional items

7

184,916

-

EBITDA before exceptional items

 

(773,201)

(356,033)

Finance costs

11

(17,523)

(2,174)

Loss before income tax

 

(1,094,601)

(414,233)

Income tax credit

12

48,440

-

Loss for the year

 

(1,046,161)

(414,233)

Other comprehensive income

 

 

 

Currency translation differences

 

(20,657)

-

Total comprehensive loss for the year

 

(1,066,818)

(414,233)

 

 

 

 

 

Loss per share attributable to owners of the parent during the year

 

£

£

Basic and diluted loss per ordinary share

13

0.29

0.13

 

 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement account.

 

The profit for the parent Company for the year was £Nil.

 

 

 

Consolidated and Company's Statement of Financial Position

As at 31 December 2016

 

 

Group

Group

Company

 

 

2016

2015

2016

 

 Notes

£

£

£

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

15

4,548,194

510,527

-

Property, plant and equipment

16

87,601

116,711

-

Investments in subsidiaries

17

-

-

4,732,456

Loan to subsidiary undertaking

17

-

-

2,755,618

Total non-current assets

 

4,645,795

627,238

7,488,074

 

 

 

 

 

Current assets

 

 

 

 

Inventories

19

11,203

8,854

-

Trade and other receivables

20

309,129

88,882

339,176

Cash and cash equivalents

21

30,039

23,156

-

Total current assets

 

350,371

120,892

339,176

Total assets

 

4,996,166

748,130

7,827,250

 

 

 

 

 

Equity attributable to owners

 

 

 

 

Share capital

25

7,365,324

194

7,365,324

Share premium account

27

-

745,645

-

Retained loss

26

(1,912,639)

(866,478)

-

Foreign currency reserve

27

(20,657)

-

-

Reverse acquisition reserve

27

(2,843,135)

-

-

Total equity

 

2,588,893

(120,639)

7,365,324

 

 

 

 

 

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred tax liabilities

23

93,069

-

-

Borrowings

24

667,024

47,120

-

Total non-current liabilities

 

760,093

47,120

-

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

22

1,445,407

805,369

461,926

Deferred tax liabilities

23

10,486

-

-

Borrowings

24

191,287

16,280

-

Total current liabilities

 

1,647,180

821,649

461,926

Total liabilities

 

2,407,273

868,769

461,926

Total equity and liabilities

 

4,996,166

748,130

7,827,250

 

 

The financial statements were approved and authorised for issue by the Board on 1 June 2017.

 

 

 

 

 

 

Declan Service                                                                                                                                                   Integumen Plc

Chief Executive Officer                                                                                                                                    Registered no: 10205396

 

 

 

 

Consolidated and Company's Statement of Cash Flows

For the period ended 31 December 2016

 

 

Group

Group

Company

 

 

2016

2015

2016

 

Notes

£

£

£

Cash Flow from operating activities

 

 

 

 

Cash (used in)/generated from operations

28

(975,267)

278,291

122,750

Taxation

 

6,930

-

-

Interest paid

 

(17,523)

(2,174)

-

Net cash (used in)/generated from operating activities

 

(985,860)

276,117

122,750

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Acquisition of investments

 

-

-

(122,750)

Payments to acquire intangibles

 

(945,032)

(384,911)

-

Purchase of property, plant and equipment

 

(1,604)

(98,313)

-

Net cash used in investing activities

 

(946,636)

(483,224)

(122,750)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Proceeds from issuance of ordinary shares

 

1,144,468

-

-

New loans

 

858,402

-

-

Capital element of finance lease

 

(24,542)

 

 

Repayments on borrowings

 

(38,949)

-

-

Net cash generated by financing activities

 

1,939,379

-

-

 

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

6,883

(207,107)

-

Cash and cash equivalents at beginning of year

 

23,156

245,838

-

Exchange difference on cash and cash equivalents

 

-

(15,575)

-

Cash and cash equivalents at end of year

21

30,039

23,156

-

           

 

 

 

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

 

Group

 

 

 

 

 

 

 

 

 

Share capital

 

Share

premium

Reverse acquisition reserve

Foreign currency reserve

 

Retained

earnings

 

 

Total

 

£

£

£

£

£

£

At 1 January 2015

194

745,645

-

-

(452,245)

293,594

Changes in equity for the year

ended 31 December 2015

 

 

 

 

 

 

Loss for the year

-

-

-

-

(414,233)

(414,233)

Total comprehensive loss

for the year

-

-

-

(414,233)

(414,233)

At 31 December 2015

194

745,645

-

-

(866,478)

(120,639)

Changes in equity for the year

ended 31 December 2016

 

 

 

 

 

 

Loss for the year

-

-

-

-

(1,046,161)

(1,046,161)

Currency translation

differences

-

-

-

(20,657)

-

(20,657)

Total comprehensive loss

for the year

-

-

-

(20,657)

(1,046,161)

(1,066,818)

Transactions with the owners

 

 

 

 

 

 

Shares issued during the year

7,365,400

1,144,392

-

-

-

8,509,792

Reverse acquisition arising

(270)

(1,890,037)

(2,843,135)

-

-

(4,733,442)

Total contributions by and

distributions to owners

7,365,130

(745,645)

(2,843,135)

-

-

3,776,350

At 31 December 2016

7,365,324

-

(2,843,135)

(20,657)

(1,912,639)

2,588,893

                     

 

Company

 

 

 

 

 

 

 

 

 

Share capital

Retained

earnings

 

Total

 

 

 

£

£

£

Changes in equity for the period beginning

28 May 2016

 

 

 

 

 

Total comprehensive gain for the year

 

 

-

-

-

Shares issued during the period

 

 

7,365,324

-

7,365,324

At 31 December 2016

 

 

7,365,324

-

7,365,324

                                                                            

 

 

Notes to the Financial Statements

For the period ended 31 December 2016

 

1. General information

Integumen Plc is a company incorporated in England and Wales. The Company is a public limited company admitted to trading on the AIM market of the London Stock Exchange since 5 April 2017. The address of the registered office is Sand Hutton Applied Innovation Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.

 

The principal activity of the Group is that of developing technologies in the skin industry. The Group has a presence in the UK, Ireland and Germany.

 

The financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group's trading companies operate. The Group comprises Integumen Plc and its subsidiary companies as set out in note 17.

 

The registered number of the Company is 10205396.

 

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

The consolidated financial statements of Integumen 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. Practice is continuing to evolve on the application and interpretations of 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.

 

Interpretations and revised standards that are not yet effective and have not been early adopted by the Group

The following interpretations to existing standards have been published that are mandatory for the Group's future accounting but which the Group has not adopted early. Management has not yet fully assessed the impact of these new standards but does not believe they will have any material impact on the financial statements.

·       Annual improvements 2014 - 2016 cycle

·       IAS 7 (Amendment): Statement of cash flows - disclosure initiative amendments (from 1 January 2017)

·       IAS 12 (Amendment): Income taxes -  Statement of cash flows - Recognition of Deferred Tax assets for unrealised losses (from 1 January 2017)

·       IFRS 2 (Amendment): Share based payments - classification and measurement of share based payment transactions (from 1 January 2017)

·       IFRS 9: Financial Instruments - Replace IAS 39 in its entirety (from 1 January 2018)

·       IFRS 15: Revenue from Contracts with Customers (from 1 January 2018)

·       Clarifications to IFRS 15 Revenue from Contracts with Customers (from 1 January 2017)

·       IFRS 16: Leases - Replace IAS 17 in its entirety (from 1 January 2019)

·       IAS 16 (Amendment): Property, plant and equipment - clarification of acceptable methods of depreciation (from 1 January 2016)

·       IAS 38 (Amendment): Intangible assets - clarification of acceptable methods of amortisation (from 1 January 2016)

·       IFRS 10 (Amendment): Consolidated financial statements - applying the consolidation exception (from 1 January 2016)

 

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 Group meets its day-to-day working capital requirements through the use of cash reserves and existing bank facilities. The Company was admitted to trading on the AIM market of the London Stock Exchange on 5 April 2017 raising £2.25million in new funds.

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance that the Group should be able to operate within the level of its current funding arrangements.

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. For this reason, they have adopted the going concern basis in the preparation of the financial statements.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary and associated 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.

 

The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in the comprehensive income with a corresponding adjustment in the carrying amount of the investment.

 

(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.

 

(b) Reverse acquisition accounting

The acquisition of Innovenn UK Limited and its subsidiary by Integumen Plc on 17 November 2016 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, Integumen Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary, Innovenn UK Limited. The following accounting treatment has been applied in respect of the reverse accounting:

 

The assets and liabilities of the legal subsidiary, Innovenn UK Limited 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 Innovenn UK Limited immediately before the business combination and the results of the period from 1 January 2014 to the date of the business combination are those of Innovenn UK Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, Integumen Plc, including the equity instruments issued in order to effect the business combination.

 

Foreign currency translation

(a) Functional and presentational 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 sterling, which is the functional and presentational currency of the main operating entities.

 

(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:

 

Fixtures and fittings                                    20% -25%

 

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

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.

 

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 assets

Classification

The Company classifies its financial assets in the loans and receivables category. The classification depends on the purpose for which the financial assets were acquired and management determines the classification of its financial assets at initial recognition.

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Company's loans and receivables comprise 'trade and other receivables' and cash and cash equivalents in the balance sheet.

 

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Company commits to purchase the asset. Assets are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the risk and rewards of ownership have been transferred.

 

Loans and receivables are subsequently carried at amortised cost using the effective interest rate method.

 

Financial liabilities

Debt is measured at fair value, being net proceeds after deduction of directly attributable issue costs, with subsequent measurement at amortised cost. Debt issue costs are recognised in the income statement over the expected term of such instruments at a constant rate on the carrying amount.

 

Research and development 


Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

 

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.

 

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.

 

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.

 

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 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.

 

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.

 

Leases

Leases which transfer substantially all the risks and rewards of ownership of an asset are treated as a finance lease. Assets held under finance leases are capitalised at their fair value at the inception of the lease and depreciated over the estimated useful economic life of the asset or lease term if shorter. The finance charges are allocated to the income statement in proportion to the capital amount outstanding.

 

All other leases are classified as operating leases. Operating lease rentals are charged to the income statement in equal annual amounts 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.

 

Revenue recognition

(a) Revenue from services to customers

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced to customers. Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements. Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at the period end is accrued. In these cases, revenue is recognised by reference to the stage of completion which is measured by reference to 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.

 

(b) 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.

 

(c) Royalty and licence income

Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

 

Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

 

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 presentational currency is sterling 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 sterling 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 Euro are set out in the table below.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

                                                                                   Average rate             Year end rate              Average rate                   Year end rate  
Compared to Sterling                                                         2016                            
2016                            2015                                    2015

Euro                                                                                           0.82                              0.85                              0.72                                       0.74

US Dollar                                                                                  0.75                              0.81                              0.66                                       0.68

 

(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 bank borrowings are 4.25% over the banks Cost of Funds Rate 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 customers before standard payment and delivery terms and conditions are offered. 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 subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the parent Company. 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
                                                                                                              one year    1 and 2 years    2 and 5 years             5 years           Total
                                                                                                                            £                          £                          £                        £                  £

At 31 December 2016:                         

Borrowings                                                               24                       191,287             182,184             484,840                         -         858,311

Trade and other payables                                     22                   1,445,407                           -                           -                         -      1,445,407

At 31 December 2015:                         

Borrowings                                                               24                         16,280                  8,262                38,858                                    63,400

Trade and other payables                                     22                       805,369                                                                                           805,369

 

 (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.

 

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.

 

(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 15. In addition, the Group has also considered the impairment of the investments in the subsidary undertakings.

 

(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) Intangible assets

The Group amortises intangible assets over their estimated useful life.  The useful lives of Goodwill and Intellectual Property Rights 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.

 

5. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Marker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources. At the year-end no separate segments are being reported by the Executive Directors. In the future, separate segments will be established as the Group's operations develop.

 

Currently the key operating performance measures used by the CODM are revenue, adjusted EBITDA and cash resources.

 

Disclosure of group revenue by geographical location is follows:

 

 

2016

2015

 

£

£

United Kingdom

11,900

4,015

United States of America

11,602

-

Belgium

27,000

-

Ireland

1,560

-

Total revenue

52,062

4,015

 

Revenues of £47,015 are derived from 3 customers each representing more than 10% of the group revenue. In 2015, all revenues were from a single customer.

 

6. Expenses - analysis by nature

 

2016

2015

 

£

£

Employee benefit expense (note 9)

395,207

110,241

Depreciation (note 16)

33,747

20,584

Amortisation (note 15)

85,214

35,442

Exceptional items (note 7)

184,916

-

Auditors remuneration - parent company and consolidation

11,124

4,500

Foreign exchange differences

(29,842)

7,334

Operating lease payments

50,008

32,675

Other expenses

336,050

205,298

Total administrative costs

1,066,424

416,074

 

7. Exceptional items

Included within administrative expenses are exceptional items as shown below:

 

 

2016

2015

 

 

£

£

Exceptional items include:

 

 

 

- Transaction costs relating to listing and business acquisition

 

325,980

-

- Deemed credit on reverse acquisition

 

(141,064)

-

Total exceptional items

 

184,916

-

 

8. Directors' remuneration

 

The remuneration of the directors in Integumen Plc who held office during the period ended 31 December 2016 was as follows:

 

 

 

2016

2015

 

£

£

Aggregate emoluments

157,928

73,405

Contribution to defined contribution pension scheme

16,411

3,360

Total directors' remuneration

174,339

76,765

 

 

For the purpose of the basis of consolidation of a reverse takeover transaction, as disclosed in note 2 to the accounts:

(a)   The comparative year ended 31 December 2015 above was remuneration for directors in Innovenn Limited, as it represents the continuation of the financial information of Innovenn Limited.

(b)   The current year ended 31 December 2016 includes remuneration of £58,474 paid by Innovenn Limited to directors of Integumen Plc.

 

The remuneration of the directors in Integumen Plc who held office during the period from 1 January 2016 to 17 November 2016, when the reverse takeover took place and from 17 November 2016 to 31 December 2016 was as follows:

 

 

 

From 1 January 2016 to 17 November 2016

From 17 November 2016 to 31 December 2016

 

 

 

Total

 

£

£

£

Aggregate emoluments

63,899

38,339

102,238

Contribution to defined contribution pension scheme

8,517

5,110

13,627

Total directors' remuneration

72,416

43,449

115,865

 

 

9. Employee benefit expense

 

2016

2015

 

£

£

Wages and salaries

385,827

198,347

Social security costs

54,031

18,102

Pension costs

11,009

6,339

Total employee benefit expense

450,867

222,788

 

Included in staff costs is £55,660 that was capitalised during the year to intangible assets (2015: £112,547)

 

10. Average number of people employed

 

2016

2015

 

No

No

Average number of people (including Executive Directors) employed was:

 

 

Administration

2

1

Operations and research

6

5

Sales and marketing

1

1

Total average number of people employed

9

7

 

The total number of employees at 31 December 2016 was 8.

 

11. Finance costs

 

2016

2015

 

£

£

Interest expense:

 

 

- Bank borrowings

12,305

-

- Interest on finance leases

5,218

2,074

Finance costs

17,523

2,074

 

 

12. Income tax expense

 

2016

2015

Group

£

£

Current tax:

 

 

Current tax for the year

-

-

Research and development tax credit

(47,129)

-

Total current tax (credit)/charge

(47,129)

-

 

 

 

Deferred tax (note 23):

 

 

Origination and reversal of temporary differences

(1,311)

-

Total deferred tax

(1,311)

-

Income tax (credit)/charge

(48,440)

-

 

The Finance Act 2015 which was substantially enacted in 2015 included legislation to reduce the main rate of UK corporation tax to 19% from 1 April 2019 and the Finance Act 2016 which was substantially enacted in 2016 included legislation to reduce the main rate of UK Corporation tax to 17% from 1 April 2020.

 

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:

 

2016

2015

 

£

£

Loss before tax

(1,094,601)

(414,233)

 

 

 

Tax calculated at domestic tax rates applicable to UK standard rate of tax of 20% (2015 - 20%)

(218,920)

(78,105)

Tax effects of:

 

 

- Expenses not deductible for tax purposes

190,010

-

- Research and development tax credit

(47,129)

-

- Losses carried forward

63,676

78,105

Tax (credit)/charge

(48,440)

-

         

 

There are no tax effects on the items in the statement of comprehensive income. The effect of losses in discussed in note 23.

 

13. 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.

 

2016

2015

Loss attributable to owners of the parent

£1,046,161

£414,233

Weighted average number of Ordinary Shares in issue

3,623,584

3,110,697

Basic profit/ (loss) per share

£0.29

£0.13

 

(b) Diluted

There were no dilutive potential ordinary shares in issue at the year end.

 

14. Dividends

There were no dividends paid or proposed by the Company in either year.

 

15. Intangible fixed assets

Group

 

Development Costs and Intellectual Property Rights

£

Total

£

Cost

 

 

At 1 January 2015

175,000

175,000

Additions1

384,911

384,911

Exchange differences

(10,241)

(10,241)

At 31 December 2015

549,670

594,670

 

 

 

Amortisation

 

 

At 1 January 2015

3,522

3,522

Charge for the year

35,442

35,442

Exchange differences

179

179

At 31 December 2015

39,143

39,143

 

 

 

Net book value

 

 

At 31 December 2015

510,527

510,527

 

 

 

Cost

 

 

At 1 January 2016

549,670

549,670

On acquisition of subsidiary (note 33)

524,329

524,329

On acquisition of trade and assets (note 33)

3,259,632

3,259,632

Additions1

152,940

152,940

Exchange differences

202,995

202,995

At 31 December 2016

4,689,566

4,689,566

 

 

 

Amortisation

 

 

At 1 January 2016

39,143

39,143

Charge for the year

85,214

85,214

Exchange differences

7,015

7,015

At 31 December 2016

131,372

131,372

 

 

 

Net book value

 

 

At 31 December 2016

4,588,194

4,588,194

 

 

 

 

           

1Additions are development costs capitalised during the period

 

At the year-end, no impairment provision is required.

 

The Company had no intangible assets.

 

16. Property, plant and equipment

Group

 

Fixtures and fittings

£

Total

£

Cost

 

 

At 1 January 2015

41,785

41,785

Additions

98,313

98,313

Exchange differences

(2,066)

(2,066)

At 31 December 2015

138,032

138,032

 

 

 

Amortisation

 

 

At 1 January 2015

534

534

Charge for the year

20,584

20,584

Exchange differences

203

203

At 31 December 2015

21,321

21,321

 

 

 

Net book value

 

 

At 31 December 2015

116,711

116,711

 

 

 

Cost

 

 

At 1 January 2016

138,032

138,032

Additions

1,604

1,604

Exchange differences

5,223

5,223

At 31 December 2016

144,859

144,859

 

 

 

Amortisation

 

 

At 1 January 2016

21,321

21,321

Charge for the year

33,747

33,747

Exchange differences

2,190

2,190

On disposal of subsidiary

-

-

At 31 December 2016

57,258

57,258

 

 

 

Net book value

 

 

At 31 December 2016

87,601

87,601

 

 

Fixtures and fittings includes the following amounts where the group is a lessee under a finance lease (note 24):

 

2016

2015

 

£

£

Cost

92,032

92,032

Accumulated depreciation

26,076

7,669

Net book value

65,956

84,363

 

Bank borrowings as detailed in note 24 are secured with a floating charge against the assets of Innovenn UK Limited, which include the above fixtures and fittings.

The Company had no property, plant and equipment.

 

17. Investments in subsidiaries

 

Investments

Loan to Subsidiary

Company

2016

2016

Carrying amount:

£

£

Additions during the year

4,732,456

2,755,618

End of the year

4,732,456

2,755,618

 

Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid. No impairment provision has been made to the investments.

 

The subsidiaries of Integumen Plc are as follows:

                               

Name of Company                                                          Proportion Held     Class of Shareholding       Country of Incorporation

Innovenn UK Limited                                                               100% (direct)           Ordinary                      United Kingdom

Innovenn Limited                                                                     100% (indirect)       Ordinary                      Ireland

Lifesciencehub UK Limited                                                     100% (direct)          Ordinary                      United Kingdom

Lifesciencehub Ireland Limited                                             100% (indirect)      Ordinary                      Ireland

Integumen Inc.                                                                          100% (direct)          Ordinary                      United States of America

Visible Youth Limited                                                              100% (indirect)       Ordinary                      United Kingdom

 

 

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.

 

All subsidiaries were acquired in the period and their activities are those of technology commercialisation in the field of health and personal care products.

 

The loan to Integumen Inc. arises on the acquisition of the trade, assets and certain liabilities of Enhance Skin Products Inc. in exchange for the issue of shares of the Company.

 

 

18. Financial instruments by category

(a) Assets

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

31 December

 

 

 

Assets as per balance sheet

 

 

 

Trade and other receivables excluding prepayments and corporation tax

256,098

75,779

339,174

Cash and cash equivalents

30,039

23,156

-

Total

286,137

98,935

339,174

 

(b) Liabilities

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

31 December

 

 

 

Liabilities as per balance sheet

 

 

 

Borrowings

858,311

63,400

-

Trade and other payables

1,445,407

805,369

461,926

Total

2,303,718

868,769

461.926

 

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 2016, 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:

 

 

2016

2015

 Rating

£

£

A - AAA

30,039

23,156

Total

30,039

23,156

 

 

19. Inventories

 

Group

Group

 

2016

2015

 

£

£

Raw materials

11,203

8,854

Inventory

11,203

8,854

 

There are no inventories in the Company.

 

The Directors consider that the carrying amount of inventory approximates to their fair value.

 

 

20. Trade and other receivables

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Trade receivables

8,827

-

-

Less: provision for impairment of trade receivables

-

-

-

Trade receivables - net

8,827

-

-

Prepayments and accrued income

12,532

12,802

-

Amounts owed by subsidiary undertakings

-

-

339,174

Taxation

40,500

301

-

Other receivables

247,271

75,779

2

 

309,130

88,882

339,176

 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

 

Other receivables include £247,000 due from TSpro GmbH, a company acquired by the Company on 24 March 2017.            

 

The carrying amounts of the Group's trade and other receivables denominated in foreign currencies were as follows:

 

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Sterling

52,997

76,184

339,176

Euros

256,133

12,698

-

 

309,130

88,882

339,176

 

 

 

21. Cash and cash equivalents

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Cash at bank and on hand

30,039

23,156

-

Cash and cash equivalents (excluding bank overdrafts)

30,039

23,156

-

 

 

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.

 

 

22. Trade and other payables

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Trade payables

154,584

48,809

-

Amounts due to group companies

-

-

153,286

Amounts due to connected parties

311,017

736,191

-

Social security and other taxes

48,146

7,951

-

Accrued expenses and deferred income

931,660

12,418

308,640

 

1,445,407

805,369

 461,926

 

23. Deferred income tax

 

Deferred tax liabilities

Deferred tax balances were as follows:

 

Group

 

2016

 

£

£

Deferred tax liability to be recovered after more than one year

93,069

Deferred tax liability to be recovered within one year

10,486

 

103,555

-

 

 

Deferred tax liabilities were made up as follows:

 

Accelerated tax depreciation

103,555

 

103,555

-

 

The movement on the deferred tax income tax account is as follows:

 

Group

 

2016

 

£

£

At 1 January

-

On acquisition of subsidiary

104,866

Income statement movement (note 12)

(1,311)

 

103,555

-

 

 

There were no deferred tax liabilities in the Company

 

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. The Group did not recognise deferred income tax assets of approximately £491,000 (2015: £190,000) mainly in respect of tax losses amounting to approximately £2,103,000 (2015: £832,000) that can be carried forward against future taxable income. An average tax rate of 23% has been used.

 

There was no deferred tax asset recognised for the Company.

 

24. Borrowings

 

Group

Group

 

2016

2015

 

£

£

Non-current

 

Bank borrowings

652,708

-

Finance leases

14,316

47,120

 

667,024

47,120

 

 

Current

 

Bank borrowings

166,745

-

Finance leases

24,542

16,280

 

191,287

16,280

 

The Company has no borrowings.

 

The maturity profile of bank borrowings was as follows:

 

Group

Group

 

2016

2015

 

£

£

Amounts falling due

 

Within 1 year

166,745

-

Between 1 and 2 years

167,868

-

Between 2 and 5 years

484,840

-

Total bank borrowings

819,453

-

 

Bank borrowings

Bank borrowings mature in 2021 and bear a fixed coupon of 4.33% annually over the bank's cost of funds.

 

Bank borrowings are secured with a floating charge against the assets of Innovenn UK Limited. Venn Life Sciences Holdings plc has also provided guarantees against those bank borrowings.

 

The Company has been compliant with its banking covenants throughout the year.

 

The bank borrowings are repayable by monthly instalments. The Company is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period, as the borrowings are fixed in nature.

 

The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is not significant.

 

The Group's bank borrowings are denominated in Euro.

 

Finance leases

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

 

 

 

 

 

 

2016

 

2015

 

 

 

 

 

£

 

£

Gross finance lease liabilities - minimum payments

 

 

 

 

No later than 1 year

 

 

 

 

29,760

 

29,760

Later than 1 and no later than 5 years

 

 

 

17,360

 

47,120

 

 

 

 

 

47,120

 

76,880

Future finance charges on finance leases

 

 

 

(8,262)

 

(13,480)

Present value of finance lease liabilities

 

 

 

38,858

 

63,400

 

 

 

 

 

 

 

 

Present value of finance lease liabilities is as follows:

 

 

 

 

No later than 1 year

 

 

 

 

24,542

 

16,280

Later than 1 and no later than 5 years

 

 

 

14,316

 

47,120

 

 

 

 

 

38,858

 

63,400

 

25. Share capital

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

7,365,324 Ordinary shares of £1 each

7,365,324

-

7,365,324

Nil (2015 - 194 ordinary shares £1 each)

-

194

-

Total

7,365,264

194

7,365,324

 

The Group's comparative figures for share capital presented in the financial statements are the consolidated numbers of Innovenn UK Limited. Innovenn UK Limited, before the reverse acquisition by the Company, subdivided its ordinary shares by converting every 1 ordinary share of £1 into 1,000 ordinary shares of £0.001 each. Furthermore, on 17 November 2017 it issued 76,112 ordinary shares for a total consideration of £1,144,468 in lieu of inter-company loans with the former group undertakings, Venn Life Sciences Limited.

 

Since incorporation of the Company on 28 May 2016 the following ordinary shares were issued:

 

-       On 28 May 2016, the Company issued two ordinary shares of £1 each at par.

 

-       On 21 October 2016, the Company issued 401,338 ordinary shares of £1 each to acquire the shares in Lifesciencehub UK Limited.

 

-       On 17 November 2016, the Company issued 4,061,570 ordinary shares of £1 each to acquire the shares in Innovenn UK Limited.

 

-       On 2 December 2016, the Company issued 2,632,868 ordinary shares of £1 each to enable its subsidiary company, Integumen Inc., to acquire the trade, assets and certain liabilities of Enhance Skin Products, Inc.

 

-       On 7 December 2016, the Company issued a further 269,546 ordinary shares of £1 each as further consideration for the acquisition of shares in Innovenn UK Limited.

 

Under reverse accounting rules the share capital of the Group changes from Innovenn UK Limited to Integumen Plc and the difference is posted in reverse acquisition reserve.

 

26. Retained earnings

 

 

Group

Company

 

£

£

At 1 January 2015

(452,245)

-

Loss for the year

(414,233)

-

At 31 December 2015

(866,478)

-

At 1 January 2016

(866,478)

-

Loss for the year

(1,046,161)

-

At 31 December 2016

(1,912,639)

-

       

 

 

27. Other reserves

Group

 

Foreign currency reserve

Share premium

Reverse acquisition reserve

 

£

£

£

At 1 January 2015 and at 31 December 2015

-

745,645

-

At 1 January 2016

-

745,645

-

Issue of ordinary shares

 

1,144,392

 

On acquisition

-

(1,890,037

(2,843,135)

Currency translation differences

(20,657)

-

-

At 31 December 2016

(20,657)

-

(2,843,135)

 

The reverse acquisition reverse was as result of the reverse acquisition of Innovenn UK Limited and its subsidiary by Integumen Plc.

 

28. Cash used in operations

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Loss before income tax

(1,046,161)

(414,233)

-

Adjustments for:

 

 

 

- Depreciation and amortisation

118,961

56,026

-

- Foreign currency translation of net assets

(54,342)

-

-

- Exceptional Item on reverse acquisition accounting

(141,064)

-

-

- Net finance costs

17,523

2,174

-

- Taxation

(48,440)

2,174

-

Changes in working capital

 

 

 

- Inventories

(2,349)

-

-

- Trade and other receivables

(4,991)

211,693

(339,176)

- Trade and other payables

185,596

422,631

461,926

Net cash (used in)/generated from operations

(975,267)

278,291

122,750

 

29. Related Party Disclosures

 

Amounts due to connected parties

 

Group

Group

Company

 

2016

2015

2016

 

£

£

£

Charles Service's estate

12,661

-

-

Coolford Limited

32,793

-

-

Venn Life Sciences Holdings plc and subsidiaries

265,561

736,191

-

 

311,017

736,191

-

 

Charles Service was related to Declan Service.

Tony Richardson is a director of Coolford Limited, a company registered in the Republic of Ireland.

Tony Richardson is a director of Venn Life Sciences Holdings plc. Venn Life Sciences Limited, a subsidiary of Venn Life Sciences Holdings plc, is a shareholder in the Company.

During the year, Venn Life Sciences Holdings plc and its subsidiaries charged management charges of £91,000 (2015: £90,000) to Innovenn UK Limited.

During the year, Innovenn UK Limited converted £1,144,466 of the amounts due to Venn Life Sciences Holdings plc and its subsidiaries into ordinary shares.


The Company

 

Amounts due from group companies

 

Company

 

2016

 

£

Innovenn UK Limited

233,110

Lifesciencehub UK Limited

106,063

 

339,174

     

 

Amounts due to group companies

 

Company

 

2016

 

£

Innovenn Limited

153,286

 

153,286

     

 

During the year, the Company charged management charges of £424,252 to Innovenn UK Limited and £106,064 to Lifesciencehub UK Limited.

 

During the year, the Company was recharged costs by Innovenn Limited of £153,286 and by Innovenn UK Limited £67,030.

 

30. Capital commitments

The Group had no capital commitments at 31 December 2016.

 

31.  Financial commitments

Operating Leases

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

Group

 

Minimum Operating Lease Payments

 

 

 

2016        

£

2015

£

 

Within one year

 

 

50,126

25,700

 

Between 1 and 2 years

 

 

50,126

51,400

 

Within second to fifth year inclusive

 

 

25,093

33,196

 

 

 

 

125,316

110,296

 

 

 

32. Post balance sheet events

 

The following events have taken place since the year end:

 

-       On 24 March 2017, the Company issued 3,354,325 ordinary shares of £1 to acquire the shares in TSpro GmbH. 


-       On 24 March 2017, the Company issued 16 ordinary shares of £1 to certain shareholders of the company.

-       On 24 March 2017, each ordinary existing share of £1 was sub-divided into one deferred share of 84.32p and one ordinary share of 15.68p. Each ordinary share of 15.68p was then subdivided into 56 ordinary shares of 1.4p each for every 5 in issue, and all of the deferred shares were cancelled and extinguished. Each ordinary share of 1.4p was then sub-divided into 1 ordinary share of 1p each and 1 deferred share of 0.4p, and all of the deferred shares were cancelled and extinguished.

-       On 29 March 2017, the Company was re-registered as a public limited company.

-       On 5 April 2017, the Company awarded options to key management over 6,720,000 ordinary shares of 1p each. The options are exercisable after two years and have an exercise price of between 5p and 6p each.

-       On 5 April 2017, the Company's ordinary shares of 1p each were admitted to trading on the AIM market of London Stock Exchange plc with ISIN number GB00BYWJ6269. On Admission:

the Company issued 45,000,000 ordinary shares of 1p each at a placing price of 5p per ordinary share raising a total of £2.25 million.

the Company granted warrants over 22,500,000 ordinary shares of 1p to subscribers in the Placing which are exercisable at 7.5p per ordinary share of 1p at any time during the two years from Admission.

the Company granted warrants over 1,800,000 ordinary shares of 1p each to Turner Pope Investments (TPI) Ltd which are exercisable at 6.25p per ordinary share of 1p at any time during the five years from Admission.

the Company granted warrants over 1,650,602 ordinary shares of 1p each to SPARK Advisory Partners Limited which are exercisable at 5p per ordinary share of 1p at any time during the five years from Admission.

 

On 11 April 2017, the Company issued 800,000 ordinary shares of 1p each.

 

As at 1 June 2017, the Company had an issued share capital of 165,860,248 ordinary shares of 1p each.

 

33. Business combinations

 

On 21 October 2016, 401,338 fully paid ordinary shares of £1.00 each were issued by the Company as consideration for the acquisition of Lifesciencehub UK Limited. 


On 17 November 2016, 4,061,570 fully paid ordinary shares of £1.00 each were issued by the Company as initial consideration for the acquisition of Innovenn UK Limited. On 7 December 2016, 269,546 fully paid shares ordinary shares of £1.00 each were issued by the Company as further consideration for the acquisition of Innovenn UK Limited. The total number of shares issued as consideration for the acquisition of Innovenn UK Limited was 4,331,116. The acquisition of Innovenn UK Limited by Integumen Plc has been accounted as reversal acquisition accounting.

On 2 December 2016, the Company issued 2,632,868 ordinary shares of £1 each to enable its subsidiary company, Integumen Inc., to acquire the trade, assets and certain liabilities of Enhance Skin Products, Inc. The assets included Intellectual Property Rights of £3,259,632. The acquired liabilities amounted to £549,674.

 

The following table summarises the consideration paid and the amounts of the assets acquired and liabilities assumed at the acquisition date of reversal acquisition of Integumen Plc and Lifesciencehub UK Limited by Innovenn UK Limited:

 

Integumen Plc and Lifesciencehub UK

£

Enhance Skin Products, Inc.

£

Fair value consideration

 

 

Deemed consideration of acquisition

400,448

2,632,868

Cash consideration

-

77,090

Total fair value consideration

400,448

2,709,958

Recognised amounts of identifiable assets acquired and liabilities assumed

 

 

Intellectual Property (note 15)

524,329

3,259,632

Trade and other receivables

576,499

-

Trade and other payables

(454,450)

(549,674)

Deferred tax liabilities (note 23)

(104,866)

-

Total fair value of identifiable net assets

541,512

2,709,958

Excess of net assets over consideration

141,064

-

 

The book value of the assets acquired is the same as their fair value other than Intellectual Property, the value of which was ascribed on acquisition

The excess consideration over identifiable net assets have been written to the Consolidated Statement of Comprehensive Income as deemed reverse acquisition costs.

Company

 

The following table summarises the consideration paid and the amounts of the assets acquired and liabilities assumed at the acquisition date of the acquisition of Lifesciencehub UK Limited by Integumen Plc:

 

Total

£

Fair value consideration

 

Consideration of acquisition Lifesciencehub UK Limited

401,338

Total fair value consideration

401,338

Recognised amounts of identifiable assets acquired and liabilities assumed

 

Intellectual Property (note 15)

524,329

Trade and other payables

(122,991)

Total fair value of identifiable net assets

401,338

Excess of net assets over consideration

-

 

The book value of the assets acquired is the same as their fair value other than Intellectual Property, the value of which was ascribed on acquisition

 

 

34. Ultimate controlling party

 

There is no one controlling party. 


 

 

The Annual Report of the Company for the period ended 31 December 2016 ("Annual Report") has today been posted to shareholders. The Notice of the AGM, and its associated Proxy Form, are both included within the Annual Report. The Annual Report is available to view and download from the Company's website at www.integumenplc.com.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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