TIDMABC
RNS Number : 2810A
ABCAM PLC
10 September 2018
The following amendments have been made to the 'Preliminary
Results 2018' announcement released on 10 September 2018 at 7am BST
under RNS No 1986A.
The 2017/18 reported revenues numbers for Japan, Rest of Asia
Pacific and Custom Products & Licensing (CP&L) revenue,
included in the table entitled 'Revenue', have been corrected
following a formatting error.
10 September 2018
ABCAM PLC
Double-digit increase in revenue and earnings enables
continued investment to sustain long-term growth
Cambridge, UK: Abcam (AIM: ABC, "Abcam" or "The Group"), a
global leader in the supply of life science research tools, today
announces its preliminary results for the year ended 30 June
2018.
FINANCIAL SUMMARY
Reported Adjusted(2)
--------------------------- ================================= ========================
2017/18 2016/17 CER(1) 2017/18 2016/17
GBPm GBPm Growth growth GBPm GBPm Growth
=========================== ======= ======= ====== ======= ======= ======= ======
Revenue 233.2 217.1 7.4% 10.7% 233.2 217.1 7.4%
Gross profit margin, % 69.9% 70.1% 69.9% 70.1%
EBITDA(2) 81.7 70.5 15.9% 88.3 73.3 20.5%
Profit Before Tax (PBT) 69.1 51.9 33.1% 81.6 64.6 26.3%
Diluted earnings per share
(EPS) (pence) 30.2p 20.7p 45.9% 32.4p 25.5p 27.1%
Annual dividend per share
(pence) 12.00p 10.18p 17.9% 12.00p 10.18p 17.9%
--------------------------- ------- ------- ------ ------- ------- ------- ------
FINANCIAL HIGHLIGHTS
-- Total revenue increased by 7.4% on a reported basis and 10.7%
on a constant exchange rate (CER) basis(1)
- Catalogue revenue grew 7.1% on a reported basis to GBP216.8m
(2016/17: GBP202.4m) and 10.2% CER
- Custom Product and Licensing (CP&L) revenue grew 11.6% on
a reported basis to GBP16.4m (2016/17: GBP14.7m) and 17.6% CER
-- EBITDA margin was 35.0% (2016/17: 32.5%) whilst Adjusted
EBITDA margin(2) increased to 37.9% (2016/17: 33.8%), primarily due
to the rolling-off of hedging contracts in the prior year
-- Reported PBT grew 33.1% to GBP69.1m and adjusted PBT grew 26.3% to GBP81.6m
-- Reported diluted EPS grew 45.9% to 30.2p and adjusted diluted EPS grew 27.1% to 32.4p
-- Strong cash generation continued, with net cash inflow from
operating activities of GBP63.3m (2017/18: GBP66.4m)
-- Proposed final dividend of 8.58p (2016/17: 7.36p), taking the
proposed total annual dividend to 12.00 pence per share, an
increase of 17.9%
OPERATIONAL AND STRATEGIC HIGHLIGHTS
-- Strong commercial and strategic execution in the year, with
all strategic key performance targets achieved:
- Recombinant antibody revenue growth of +22.3% CER (target
20-25%)
- Immunoassay product revenue growth of +25.4% CER (target
20-25%)
- 12-month rolling transactional Net Promotor Score (tNPS) up 2
percentage points to 64% (target 55-65%)
-- Continued to drive quality standards through knockout
validation, recombinant antibodies, and other quality initiatives,
with a further 400+ products knockout validated in the year
-- Acquired the exclusive rights from Roche for a portfolio of
Spring Bioscience products for research use only (RUO)
applications
-- Further increased our addressable market in CP&L (Abcam
Inside), with 28 new framework agreements signed with
pharmaceutical and diagnostic partners
-- Continued to expand our FirePlex(R) platform, with the
addition of over 150 new validated antibody pairs
SUMMARY OUTLOOK AND GUIDANCE
-- Long-term market outlook remains positive; good momentum across the business
-- Expect total constant currency revenue growth for 2018/19 of
11%; ambition to maintain revenue growth at low double-digit rates
over the medium-term
-- Anticipate 2018/19 adjusted EBITDA(2) margin of 36% as a
result of increased investment in strategic initiatives
Commenting on the performance, Alan Hirzel, Abcam's Chief
Executive Officer, said:
"It has been a good year for Abcam, delivering double-digit
revenue growth on a constant currency basis and meeting all of our
strategic targets. Our customer focused strategy is delivering
results, whilst our strong cash generation and balance sheet
strength underpin the continued investments we are making into our
teams, systems and facilities to sustain our double-digit growth
rates and help life scientists around the world to discover more,
faster."
--------------S --------------
For further information please contact:
Abcam + 44 (0) 1223 696 000
Alan Hirzel, Chief Executive Officer
Gavin Wood, Chief Financial Officer
James Staveley, Vice President, Investor Relations
J.P. Morgan Cazenove - Nominated Advisor & Corporate Broker + 44 (0) 20 7742 4000
James Mitford / Jonty Edwards
FTI Consulting + 44 (0) 20 3727 1000
Ben Atwell / Brett Pollard / Natalie Garland-Collins
1. Constant currency results (CER) are calculated by applying
prior period's actual exchange rates to this period's results.
2. These preliminary results include discussion of alternative
performance measures which are defined in further detail in note 9.
These measures include adjusted financial measures, which are
explained in note 1(c) and reconciled to the most directly
comparable measure prepared in accordance with IFRS in note 3 to
the financial information. Further detail on the Group's financial
performance is set out in the financial information and notes
thereto.
This announcement, including any information included or
incorporated by reference in this announcement, may contain
forward-looking statements (including words such as 'believe',
'expect', 'estimate', 'intend', 'anticipate' and words of similar
meaning) which are based upon current expectations and assumptions
regarding anticipated developments and other factors affecting
Abcam. All statements other than statements of historical facts may
be forward-looking statements and should not be treated as
guarantees of future performance. These forward-looking statements
involve risks and uncertainties, many of which are beyond the
control of Abcam, and there are important factors that could cause
actual results to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements speak only as at the date of this announcement and
accordingly undue reliance should not be placed on such statements.
Abcam does not assume any obligation to, and does not intend to,
revise or update these forward-looking statements, except as
required pursuant to applicable law.
About Abcam plc
As an innovator of reagents and tools, Abcam's purpose is to
serve life scientists globally to achieve their mission, faster.
Providing the research and clinical communities with tools and
scientific support, the Group offers highly validated biological
binders and assays to address important targets in critical
biological pathways.
A pioneer in data sharing and ecommerce in the life sciences,
Abcam's ambition is to be the most influential company in life
sciences by helping advance global understanding of biology and
causes of disease, which, in turn, will drive new treatments and
improved health. Two-thirds of the world's 750,000 life science
researchers use Abcam's antibodies and affinity binders, reagents,
biomarkers and assays and the Group's products are mentioned in
over 20,000 of the 56,000 peer-reviewed papers published each year
in the life sciences.
By actively listening to and collaborating with researchers, the
Group continuously advances its portfolio to address their needs. A
transparent programme of customer reviews and datasheets, combined
with an industry-leading validation initiative, gives researchers
increased confidence in their results.
Abcam's eleven locations are located in the world's leading life
science research hubs, enabling local services and multi-language
support. Founded in 1998 and headquartered in Cambridge, UK, the
Group sells to more than 100 countries. Abcam was admitted to AIM
in 2005 (AIM: ABC).
To discover more, please visit www.abcam.com and
www.abcamplc.com
Chief Executive Officer's Review
Sustaining long-term profitable growth
Abcam started 20 years ago with one big idea: to provide
research scientists faster access to antibodies that work. Our
company was a pioneer applying e-commerce tools to the life
sciences. That disruptive innovation made it possible to offer an
extensive antibody range, validation data, and rapid customer
service to researchers worldwide. The financial success of the
company and support of our shareholders since then has enabled us
to increase investment in long-term profitable growth.
Performance in 2018
In business terms, 2017/18 was a good year. Abcam again grew
profitably. Revenue increased by 7.4% on a reported basis and by
10.7% on a constant currency basis, driven by recombinant
antibodies (CER revenue +22.3%), immunoassays (CER revenue +25.4%)
and China (CER revenue +26.0%), whilst our Custom Product &
Licencing business also returned to growth. At the same time,
adjusted Profit Before Tax (PBT) grew over 26%, to GBP81.6m, with
reported PBT of GBP69.1m (2016/17: GBP51.9m). The business
continues to be strongly cash generative, and we are putting that
cash to work in both capital projects, to ensure the future
scalability of our business, as well as investing further in the
continued development of our products and services.
Doing more for customers, faster
When I joined Abcam in 2013, I was inspired to accomplish two
things: ensure Abcam is guided by the needs of our customers and
build a business that will deliver long-term sustainable growth
while influencing and accelerating life science discovery
worldwide. In that first year, we started a transformation in
leadership, scope of business, organisation, operations and purpose
that, over time, would help to achieve those dual aims.
Five years later, we have made tremendous progress thanks to the
loyalty of our customers and the hard work of our global team. We
have roughly doubled the scale of Abcam since 2013 in terms of our
revenue, profits and impact on science.
Today, Abcam is a global leader in providing antibodies to
academic researchers, and research and development teams worldwide.
Our customers have provided us with greater clarity about our role:
we serve them to help them achieve their missions, faster than they
might otherwise. Like a Sherpa for a mountaineer, we dedicate
ourselves to the success of scientists, helping them select the
right tools and navigate the best path in their ascent to the
highest levels of discovery.
Innovating beyond our antibody heritage
Over the years we have learned a lot about what our customers
want. In response, we have focused on innovating and expanding our
product range, extending our customer influence beyond our original
research antibody heritage. A relentless focus on our customers'
needs has led us to acquire and integrate five companies and build
new technology applications of our own, such as the use of rabbit
monoclonal hybridomas, phage display, next generation sequencing
and CRISPR-Cas9 technologies to enhance and accelerate antibody
selection and validation. This focus on customer led innovation
continues. We are well on our way to creating a portfolio of
complementary antibody pairs that enable novel, high-throughput
screening techniques using our FirePlex(R) particles. Because of
these developments, we have an enviable and expanding portfolio of
distinctive and proprietary life science innovation
capabilities.
In the past year, there have been several notable examples of
Abcam products influencing life sciences and patient outcomes
including:
-- the use of our ArV7 antibody (Ab198394) for the early
diagnosis of metastatic prostate cancer;
-- the use of FirePlex(R) micro-RNA multiplex analysis to
enhance identification of signals related to the rapid onset of
cardiac arrest (S. Das research at Harvard Medical School,
Boston);
-- the development of novel RabMAb(R) recombinant antibodies to
support research into the reduction of chemotherapy-related
side-effects (F. Shao research at the National Institute of
Biological Sciences, Beijing)
As noteworthy as these examples are, it is the recognition of
the contributions to the work of the thousands of scientists we
serve around the world every day that remain the foundation of our
business. This includes:
-- over 20% of global publications using antibodies cited Abcam in 2017;
-- #1 cited company for over 30% of protein targets studied in
research in 2017, up from 22% in 2013;
-- customer awards via CiteAb recognising our work in China and Cancer research; and
-- customer satisfaction (measured by tNPS) of 64%, up 2 percentage points on 2017
My belief is commercial success follows from appropriate focus
on our customers and team. Our performance this year has been
encouraging and in line with our ambitious targets, with growth
once again well above the underlying market growth rate.
Striving to continuously improve
As we examine our customers and markets, we remain confident
that we still have many opportunities and ideas to create future
sources of growth and value for all our stakeholders. Ideas are
wonderful and easy to generate at Abcam. Implementing them well is
tougher and comes with the typical challenges of change. Whilst we
are moving quickly to grow and improve our business, we do not
always get everything right.
As good as our customer relationships and net promoter scores
are, there are still too many occasions when we fall short of their
high expectations. One frustrating example is that customers must
sometimes wait too long for a product. We have built a new supply
chain team, but it is fair to say that we are still not achieving
the customer performance levels we aspire to in supply chain and
manufacturing. We will be investing more in talent and automation
to improve in these areas.
Upgrading our systems in order to efficiently and effectively
scale our business is critical for our continued growth. We set out
to improve effectiveness and efficiency in four major business
areas with Oracle Cloud ERP: customer contact, human resources,
finance, and supply chain. To date, we have successfully completed
what we wanted to achieve in human resources and customer contact.
As we have learned more about the system and its maturity, we have
decided to phase the remainder of the programme to reduce the risk
to our business and customers. As a consequence, the programme will
take longer and cost more than we predicted when we defined our
requirements in 2015. We have established a new approach for more
frequent and lower risk deployment and in this coming year we will
focus on implementing the finance modules. Once completed, we will
have substantially concluded three of the four major objectives of
the programme.
I know that if we are not breaking things and occasionally
falling short of our goals, we are not being bold enough. We must
keep pushing and investing to build this company to have a greater
role for customers in the markets we serve, and that work will
continue for many years to come.
Investing in our future
We remain committed to our goal of building a company that will
endure and play a growing role in the advances in science and
medicine. Some of this investment is in the basic building blocks
that should be in place to enable high growth, such as:
-- strengthening our global team's skills and incentives -
including broader equity participation;
-- automating our production and distribution processes;
-- enhancing our IT capabilities; and
-- improving and consolidating our facilities including a move
into our new headquarters in Cambridge, UK.
Other investments, more closely linked to innovative development
concepts for our future, include:
-- further enhancing product validation;
-- developing new, high-value products using existing and
emerging technologies such as gene editing;
-- strengthening our market leadership in China;
-- expanding our single and multiplex immunoassay portfolio;
-- extending and improving the application of machine learning across our business; and
-- introducing more personalised and dynamic content to our e-commerce.
As we continue to invest in our long-term success, we expect to
sustain top line growth ahead of market growth. My commitment is to
ensure our team is rigorously prioritising the areas that offer the
greatest return to all our stakeholders.
Our strategic priorities
In 2017/18 we refined our five multi-year strategic priorities
to reflect the ongoing development of our markets and our business.
They are:
-- Sustain antibody and digital marketing leadership
-- Expand in related growth markets
-- Invest in operating capabilities to double our 2016 scale by 2023
-- Sustain attractive economics
-- Supplement organic growth through acquisitions and partnerships
We have made further progress in each of these areas in the last
year and, as we do so, we are identifying more growth
opportunities. You can read more about our achievements against
these priorities in the Strategic Priorities section.
Our performance against our strategic key performance indicators
(KPIs), as listed below, reflects achievement within the range of
our full year targets:
Strategic KPIs 2017/18 target Actual
-------------------------------------- --------------- -------
Recombinant antibody product revenue
growth(1) 20-25% 22.3%
-------------------------------------- --------------- -------
Immunoassay revenue growth(1) 20-25% 25.4%
-------------------------------------- --------------- -------
Customer engagement: transactional
NPS 55-65% 64%
-------------------------------------- --------------- -------
1 Constant exchange rate
Looking forward
There is good momentum across the business and we believe the
Group is in a strong position for a successful future. The organic
and inorganic investments we have made and will continue to make
are enabling Abcam to sustain its growth and achieve the stretching
targets we have set for ourselves. I am confident that these
investments will generate long-term value for our shareholders
whilst helping us serve life scientists around the world to achieve
their missions faster.
Alan Hirzel
Chief Executive Officer
Strategic Priorities
Our strategy is designed to generate profitable growth and
improve our long-term financial performance. Key developments in
the year and our priorities for the next 12 months are set out in
the table below:
Progress in 2017/18 Priorities for 2018/19
1. Delivered primary antibody revenue Continue to develop new products
Sustain antibody and digital growth ahead of the global market focused on high value areas, based
marketing leadership growth rate on customers' research
Further enhanced our target needs
selection process to increase the Further enhance our product
success of new products validation and continue to raise
Implemented process improvements to product quality standards across
shorten lead times, improving the the catalogue
success rates of product Implement the next phase of our
launches growth strategy for China
Continued to work with suppliers to
add validation data as well as
delivering improvements
in our own range through enhanced
antibody validation and production
techniques
Continued to grow and enhance our
digital footprint, driving better
engagement and conversion
-------------------------------------- --------------------------------------
2. Published over 200 new SimpleStep Continue to grow our immunoassay
Expand in related growth markets ELISA(R) immunoassays products on business in line with multi-year
the catalogue aspiration
Further developed FirePlex(R) Continue to expand the number of
multiplex platform, validating over Abcam Inside projects and framework
150 pairs of antibodies agreements
and launching a high throughput Launch teams to develop 1-2 new
product (Fireplex(R)-HT) to simplify strategic initiatives
and speed up workflows
Further expanded electronic
catalogue connections to
large-volume customers
Continued to expand addressable
market in Custom Products and
Licensing, with 28 new framework
agreements signed and over 150
projects initiated for
pharmaceutical and diagnostic
development
partners
-------------------------------------- --------------------------------------
3. Continued to progress development of Successfully deploy next phases of
Invest in operating capabilities for our new enterprise resource planning Oracle Cloud ERP
2x 2016 scale by 2023 (ERP) system, although Roll-out equity participation scheme
at a slower pace than planned to global employees
Delivered distribution improvement Successfully move UK team to the new
projects in the UK, US and China headquarters on the Cambridge
Continued construction of our new UK Biomedical Campus
headquarters on the Cambridge Continue to fill or enhance our
Biomedical Campus - on capabilities across supply chain and
track to move in during 2018/19 manufacturing, IT and
Continued investment to support new growth projects
employee engagement and development
across our global organisation
-------------------------------------- --------------------------------------
4. Identified and delivered operating Continue to realise productivity
Sustain attractive economics efficiencies and productivity gains, gains
including the successful Move to direct distribution in more
closure and outsourcing of our markets
Bristol, UK manufacturing operations
Delivered further procurement
efficiency benefits through the
creation of our global procurement
function
Made preparations to move to direct
distribution in more markets
-------------------------------------- --------------------------------------
5. Signed exclusive licence agreement Continue to strengthen relationships
Supplement organic growth - with Roche covering a portfolio of for future deals
partnerships and acquisition approximately 760 products,
including 243 RabMAbs(R)
Entered into a number of
collaborations with industry
partners
-------------------------------------- --------------------------------------
Financial Review
This financial review includes discussion of alternative
performance measures which are defined further in the Notes to the
Preliminary Financial Information. These measures include
alternative performance measures, which are explained in note 9 and
reconciled to the most directly comparable measure prepared in
accordance with IFRS in note 3. Further detail on the Group's
financial performance is set out in the Preliminary Financial
Information and notes thereto.
Constant exchange rates ("CER") growth is calculated by applying
the applicable prior period average exchange rate to the Group's
actual performance in the respective period.
Overview of 2018 Financial Performance
Reported Results Adjusted Results
------------------------------- ======================= =======================
Year ended 30 June Year ended 30 June
------------------------------- ======================= =======================
2018 2017 Growth 2018 2017 Growth
GBPm GBPm GBPm GBPm
=============================== ====== ====== ======= ====== ====== =======
Revenue 233.2 217.1 7.4% 233.2 217.1 7.4%
Gross profit 163.0 152.1 7.2% 163.0 152.1 7.2%
Gross profit margin (%) 69.9% 70.1% 69.9% 70.1%
EBITDA 81.7 70.5 15.9% 88.3 73.3 20.5%
EBITDA margin (%) 35.0% 32.5% 37.9% 33.8%
Depreciation and Amortisation (12.9) (15.4) (16.2%) (7.0) (8.9) (21.3%)
------------------------------- ------ ------ ------- ------ ------ -------
Operating profit 68.8 55.1 24.9% 81.3 64.4 26.2%
Operating profit margin
(%) 29.5% 25.4% 34.9% 29.7%
Net finance income / (expense) 0.3 (3.2) n/a 0.3 0.2 50.0%
------------------------------- ------ ------ ------- ------ ------ -------
Profit before Tax 69.1 51.9 33.1% 81.6 64.6 26.3%
Taxation (6.9) (9.5) (14.9) (12.6)
------------------------------- ------ ------ ------- ------ ------ -------
Profit after Tax 62.2 42.4 46.7% 66.7 52.0 28.3%
------------------------------- ------ ------ ------- ------ ------ -------
Earnings per share
Basic earnings per share 30.5p 20.9p 45.9% 32.7p 25.7p 27.2%
Diluted earnings per share 30.2p 20.7p 45.9% 32.4p 25.5p 27.1%
Annual Dividend per share 12.00p 10.18p 17.9% 12.00p 10.18p 17.9%
------------------------------- ------ ------ ------- ------ ------ -------
Net cash at end of period 90.2 84.8 6.4% 90.2 84.8 6.4%
------------------------------- ------ ------ ------- ------ ------ -------
Return on Capital Employed 18.8% 16.7% 22.2% 19.6%
------------------------------- ------ ------ ------- ------ ------ -------
Abcam has delivered another year of solid financial performance
and this is reflected in the growth in adjusted earnings per share
(adjusted EPS) of over 27%. On a reported basis EPS grew over 45%.
Total CER revenue growth was up 10.7% and, as expected, our Custom
Products & Licensing (CP&L) revenues returned to growth,
rising 17.6% (CER). We believe we have once again delivered growth
above underlying market rates in every region and whilst Japan
experienced a more challenging market backdrop in the second half,
China has continued to deliver at the high end of our expectations.
We have maintained gross margin and we have continued to invest in
the future of our business.
We are investing to ensure that we have the people,
infrastructure, processes and IT systems to establish the platform
that will allow the Group to grow to twice its 2016 scale by 2023.
This year we have invested significantly in our Oracle Cloud ERP
system making steady progress in the design, build, test and change
management associated with the project. We have decided to adopt a
phased approach to the implementation of the remaining modules to
reduce the risk to our business and customers. During calendar 2019
we expect the most significant roll out will be the implementation
of Oracle Fusion Finance modules in the majority of our global
locations. The construction and preparations for our new
headquarters in Cambridge, UK are progressing well, and we are
looking forward to moving in early calendar 2019.
We continue to invest in our people, not only by ensuring we
have the right teams, skills and capabilities globally, but also in
their development, training and remuneration. In this regard, we
are delighted to be launching a new global share scheme, available
to all of our employees in the coming year. Looking forward, we are
confident that our strong financial position and cash generation
provide the resources to invest in our long-term strategy to build
the infrastructure required for a much larger company, sustain our
growth and serve the needs of our customers.
Revenue
Reported revenue
---------------------------------------------- -------------------- --------------------- -------
2017/18 2016/17
----------------------------------------------
GBP'm GBP'm Increase / (Decrease)
in reported CER
revenue growth
---------------------------------------------- --------- --------- --------------------- -------
Catalogue regional split:
The Americas 88.5 86.5 2.3% 8.0%
EMEA 62.6 57.1 9.6% 7.7%
China 33.0 26.4 25.0% 26.0%
Japan 16.2 17.3 (6.4%) 1.1%
Rest of Asia Pacific 16.5 15.1 9.3% 14.3%
---------------------------------------------- --------- --------- --------------------- -------
Catalogue revenue 216.8 202.4 7.1% 10.2%
Custom Products & Licensing (CP&L) revenue(1) 16.4 14.7 11.6% 17.6%
---------------------------------------------- --------- --------- --------------------- -------
Total reported revenue 233.2 217.1 7.4% 10.7%
---------------------------------------------- --------- --------- --------------------- -------
Catalogue product split:
Primary and secondary antibodies 174.5 165.5 5.4% 8.4%
of which Recombinant antibodies 48.0 40.4 18.8% 22.3%
Other products(2) 42.3 36.9 14.6% 18.2%
of which Immunoassay products 15.0 12.4 21.0% 25.4%
---------------------------------------------- --------- --------- --------------------- -------
Catalogue revenue sub-total 216.8 202.4 7.1% 10.2%
---------------------------------------------- --------- --------- --------------------- -------
1 Includes royalty income, custom services, IHC/IVD and
licensing revenue
2 Includes kits, assays, proteins, peptides, lysates and
biochemical (AAAI) products
Total reported revenues for the year increased by 7.4% to
GBP233.2m. Sterling was stronger against the basket of foreign
currencies in which the Group trades which adversely impacted our
reported revenues. Adjusting for this strengthening in Sterling,
CER revenue growth was 10.7% (2016/17: 9.9%).
Catalogue revenue grew by GBP14.4m or 7.1% on a reported basis
and 10.2% on a constant currency (CER) basis. Within this, the key
product growth drivers were recombinant antibodies, with sales up
by GBP7.6m or 18.8% to GBP48.0m (22.3% at CER), and immunoassay
sales, which grew by GBP2.6m or 21.0% (25.4% at CER) to GBP15.0m.
By region, China continues to be our fastest growing major market,
up 25.0% (26.0% CER) and contributing 15.2% of Catalogue revenue,
whilst Japan fell by 6.4% on a reported basis (up 1.1% CER),
reflecting the more challenging market conditions.
CP&L revenue, comprising custom services, in
vitro-diagnostic (IVD)/immunohistochemistry (IHC) and royalties and
licence income, continues to remain an area of increased focus and
investment for the Group. In line with our expectations, this area
returned to growth in the year, rising by GBP1.7m or 11.6% (17.6%
CER) to GBP16.4m (2016/17: GBP14.7m)
Gross margin
Reported gross margin was down very slightly to 69.9% (2016/17:
70.1%), with modest positive impacts from exchange rate movements
and catalogue product mix offset by catalogue regional mix and the
increase in CP&L revenue. We continue to anticipate gradual
improvements to gross margin over time, driven by continued product
mix and productivity improvements to our manufacturing sites as we
introduce more automation.
Operating costs and expenses
Reported Adjusted(1)
======================= =====================
2018 2017 % 2018 2017 %
GBPm GBPm Change GBPm GBPm Change
================================== ====== ====== ======= ===== ===== =======
Selling, general & administrative
expenses 78.2 78.4 (0.3%) 69.8 73.5 (5.0%)
Research and development
expenses 16.0 18.6 (14.0%) 11.9 14.2 (16.2%)
---------------------------------- ------ ------ ------- ----- ----- -------
Total operating costs and
expenses 94.2 97.0 (2.9%) 81.7 87.7 (6.8%)
Depreciation and Amortisation (12.9) (15.4) (16.2%) (7.0) (8.9) (21.3%)
---------------------------------- ------ ------ ------- ----- ----- -------
Total operating costs and
expenses excluding Depreciation
and Amortisation 81.3 81.6 (0.4%) 74.7 78.8 (5.2%)
---------------------------------- ------ ------ ------- ----- ----- -------
Share-based compensation 3.4 3.9 (12.8%) 3.4 3.9 (12.8%)
---------------------------------- ------ ------ ------- ----- ----- -------
1 Details of items excluded from reported costs and expenses are
provided in Adjusting Items below and in note 3 of the financial
information
Selling, general & administrative expenses
We have continued to invest in Abcam's capabilities, people,
processes and IT systems to support and drive our medium and
long-term growth aspirations. Excluding foreign exchange related
impacts, selling, general and administrative expenses rose by 14.1%
on an adjusted basis. On a reported basis, after the impact of the
year-on-year movement in exchange rates, expenses decreased by
GBP0.2m or 0.3%.
Included in the year-on-year movement in reported expenses are
the following key items:
- GBP3.8m increase in spend relating to the further
strengthening of our commercial, marketing and support teams, with
key people being recruited into our Portfolio and Business
Development team, an area of strategic importance for the
business;
- GBP2.1m cost increase in global operations and logistics,
related to the increase in revenue volumes and organisational
redesign, including further roles to build in-house expertise in
global operational processes and increased premises space to
accommodate expansion of operations;
- GBP2.3m increase in operational costs associated with the work
performed on the Oracle Cloud ERP project, to GBP6.1m (2016/17:
GBP3.8m); and
- GBP12.8m year-on-year foreign exchange related reduction owing
to the relative strength of Sterling. This comprises GBP1.6m of
costs denominated in the currency of the Group's overseas entities
(which, when translated into stronger Sterling results in lower
charges to expenses), GBP10.6m of year-on-year net currency benefit
from forward selling currency contracts and GBP0.6m of
translational currency impacts.
The charge for share-based payments fell GBP0.5m in the year, to
GBP3.4m (2016/17: GBP3.9m). This figure is expected to increase in
2019 following the implementation of a new global all employee
share scheme.
Within reported expenses, depreciation and amortisation expenses
decreased by GBP2.0m in the year to GBP6.3m, including GBP1.8m
related to the amortisation of acquisition intangibles (2016/17:
GBP1.5m). The Group's amortisation and depreciation expense is
expected to increase in 2018/19 and step up again in 2019/20 as
charges associated with the implementation of the next phase of ERP
modules and the completion of the new Group headquarters come into
effect. The depreciation charge will also be impacted in 2019/20 by
the introduction of the new accounting standard on leases.
Research & development expenditure (R&D)
R&D expenditure relates to the development of new products,
as well as costs incurred in identifying and implementing
production process improvements. We continue to focus on developing
new products as well as improving the quality of our existing
catalogue. These costs do not meet the requirements to be
capitalised as an intangible asset and are therefore expensed
through the income statement.
Reported R&D expenses decreased by GBP2.6m or 14.0%, to
GBP16.0m (2017: GBP18.6m). Whilst total reported R&D
expenditure decreased, this included an increase of GBP2.4m for UK
R&D tax credits, to GBP3.1m (2016/17: GBP0.7m), a year-on-year
benefit relating to the change in amortisation period relating to
capitalised product development, amounting to GBP0.7m, as well as
the effect of exchange rate movements that contributed GBP0.7m of
the decrease. Following these adjustments, the increase in R&D
costs was GBP1.2m or 6.5%, to GBP19.8m.
R&D-related depreciation and amortisation charges were
GBP0.5m lower in the year, at GBP6.6m, including GBP4.1m related to
the amortisation of acquisition intangibles (2017: GBP4.4m) which
are excluded from adjusted costs.
Investment in systems, processes and infrastructure
We continue to invest to maintain our double-digit growth
trajectory and provide the operating capabilities required to scale
the business. This was underpinned by investment in our people, IT
systems, infrastructure, capabilities and business processes during
the year to provide us with operational scalability.
Enterprise Resource Planning (ERP) programme
We had targeted a full implementation of the ERP system in
2017/18. We are now planning a phased approach to the remaining
modules, which are expected to be implemented over the medium-term
as part of a broader investment in our IT infrastructure.
We incurred capital expenditure of GBP17.5m (2016/17: GBP10.6m)
and operating costs of GBP6.1m during the year (2016/17: GBP4.4m),
as well as depreciation of GBP0.8m on the modules already deployed.
Total capitalised expenditure relating to the Oracle Cloud ERP
programme to date amounts to GBP33.6m.
In 2018/19 we plan to implement the finance and certain other
modules at an estimated cost of approximately GBP16m (including
capital expenditure of approximately GBP12m). Beyond 2018/19 we
anticipate that we will continue to invest in our IT systems and
broader business processes through implementing further new Oracle
modules as well as investing further in those we have already
implemented.
New global headquarters, Cambridge, UK
We will relocate from our three existing sites in Cambridge to a
single, purpose-built headquarters on the Cambridge Biomedical
Campus in early 2019. We anticipate Abcam's total expenditure on
the building to be approximately GBP16m. In addition, we expect to
spend approximately GBP9m on laboratory and office design and
office fit-out costs. In 2017/18 we incurred capitalised costs of
GBP13.5m in respect of this project, bringing the total cost to
date to GBP15.2m.
Earnings and tax
The increase in gross profit delivered in the year, together
with a net reduction in operating costs, due primarily to foreign
exchange related impacts discussed previously, resulted in an
GBP11.2m increase in reported earnings before Interest, Taxation,
Depreciation and Amortisation (EBITDA) to GBP81.7m (2016/17:
GBP70.5m), an increase of 15.9%. Adjusted EBITDA rose 20.5% to
GBP88.3m (2016/17: GBP73.3m), giving an adjusted EBITDA margin of
37.9% (2016/17: 33.8%).
After depreciation and amortisation charges of GBP12.9m
(2016/17: GBP15.4m), reported operating profit rose 24.9% to
GBP68.8m. Adjusted operating profit rose 26.2% to GBP81.3m,
representing an adjusted operating margin of 34.9% (2016/17:
29.7%).
Profit Before Tax (PBT) on a reported basis was GBP69.1m
(2016/17: GBP51.9m). This was after net finance income of GBP0.3m
(2016/17: net finance expense of GBP3.2m). Adjusted PBT rose 26.3%
to GBP81.6m (2016/17: GBP64.6m).
Due to the impacts relating to the introduction of the US Tax
Cuts and Jobs Act, the Group's reported effective tax rate was
10.0% (2016/17: 18.3%). The effective rate on adjusted profits was
18.3% and excludes the impact of the above (2016/17: 19.5%).
Further details are provided in note 3 to the financial
information. Notwithstanding further tax changes in the
jurisdictions in which we operate, the effective rate is expected
to be broadly maintained at around 19% to 20% in the
medium-term.
Basic earnings per share (EPS) was 30.5p (2016/17: 20.9p), with
adjusted basic EPS of 32.7p (2016/17: 25.7p). Diluted Earnings Per
Share (EPS) was 30.2p (2016/17: 20.7p). Adjusted diluted EPS
increased by 27.1% to 32.4p (2016/17: 25.5p).
Adjusting Items
2018 2017
GBPm GBPm
========================================================== ====== ======
System and process improvement costs (6.1) (3.8)
---------------------------------------------------------- ------ ------
Costs associated with the new Group headquarters (0.3) -
---------------------------------------------------------- ------ ------
Acquisition-related costs (0.2) -
---------------------------------------------------------- ------ ------
Amortisation of acquisition-related intangible assets (5.9) (5.9)
---------------------------------------------------------- ------ ------
Contingent consideration fair value adjustment - 1.0
---------------------------------------------------------- ------ ------
Impairment related to system and process improvements - (0.6)
---------------------------------------------------------- ------ ------
Total adjusting items affecting operating profit (12.5) (9.3)
---------------------------------------------------------- ------ ------
Finance costs: Unwinding of discount factor on contingent
consideration and fees - (3.4)
---------------------------------------------------------- ------ ------
Total adjusting items affecting profit before tax (12.5) (12.7)
---------------------------------------------------------- ------ ------
System and process improvement costs related to our Oracle Cloud
ERP project increased by GBP1.7m in the year to GBP6.1m. The Group
also incurred GBP0.3m in costs relating to the move to the new
headquarters in Cambridge, UK and acquisition-related costs of
GBP0.2m relating to the exclusive license agreement with Roche
relating to the Spring portfolio.
Foreign exchange
The results of the Group are impacted by movements in foreign
exchange rates, particularly movements in Sterling against the US
Dollar, Euro and Chinese Renminbi. In 2018, the impact of foreign
exchange movements in the year was GBP7.1m unfavourable in revenue
and GBP1.1m in adjusted EBITDA, after the impact of hedging.
Cash flow and net cash
2018 2017
GBPm GBPm
=============================================== ====== ======
Operating cash flows before working capital 81.0 71.7
Change in working capital (8.1) 4.8
----------------------------------------------- ------ ------
Cash generated from operations 72.9 76.5
Income taxes paid (9.6) (10.1)
----------------------------------------------- ------ ------
Net cash inflow from operating activities 63.3 66.4
Cash outflow of investing activities (37.7) (32.9)
Cash outflow from financing activities (20.6) (17.8)
----------------------------------------------- ------ ------
Increase in cash and cash equivalents 5.0 15.7
----------------------------------------------- ------ ------
Cash and cash equivalents at beginning of year 84.8 68.9
Effect of foreign exchange rates 0.4 0.2
----------------------------------------------- ------ ------
Cash and cash equivalents at end of the year 90.2 84.8
----------------------------------------------- ------ ------
Free Cash Flow(1) 26.8 41.3
----------------------------------------------- ------ ------
(1) Free Cash Flow comprises net cash generated from operating
activities less net capital expenditure and cash flows relating to
committed capital expenditure
The Group continues to be strongly cash generative, with cash
inflow from operations of GBP63.3m (2016/17: GBP66.4m) and free
cash flow of GBP26.8m (2016/17: GBP41.3m), after a year-on-year
increase in working capital of GBP12.9m. The change in working
capital is explained by an increase in stock of top-selling
products to improve availability, amounting to approximately GBP5m,
as well as certain other one-off working capital inflows in the
prior year.
Cash outflow on investing activities of GBP37.7m (2017:
GBP32.9m) includes GBP1.5m in relation to the acquisition of the
exclusive license agreement from Roche (with a further commitment
of GBP11.8m payable in 2018/19) and capital expenditure of
GBP36.5m. Major capital expenditure items included GBP18.3m and
GBP11.6m on the Oracle Cloud ERP and new Group headquarters,
respectively, as well as GBP4.3m on Internally developed
technology.
After net cash outflows from financing activities of GBP20.6m,
predominantly relating to dividend payments, together with a small
foreign exchange impact, the Group ended the year with closing cash
of GBP90.2m (2016/17: GBP84.8m), a net increase of GBP5.4m.
Balance sheet
Goodwill and Intangibles
Goodwill was GBP114.2m (2017: GBP115.5m) with the decrease
relating mainly to exchange rate movements.
Intangible assets were GBP106.3m (2017: GBP73.6m). The increase
primarily reflects additions arising from the Spring licence
acquisition from Roche (GBP10.9m) together with GBP17.5m in respect
of investments made in our new ERP system and GBP10.8m relating to
the reclassification of 'Internally developed technology' from
property, plant and equipment to intangible assets.
Property, plant and equipment
Property, plant and equipment additions of GBP18.3m (2016/17:
GBP10.2m) have been made in the year, comprising GBP13.5m (2016/17:
GBP1.1m) associated with the construction of our new Group
headquarters and GBP4.8m of other investments (2016/17: GBP9.1m).
These other investments include GBP2.4m spent on laboratory
equipment across our sites in the UK, the US and China, as well as
GBP2.0m on continued development of the Group's product range.
Trade and other payables
Trade and other payables were GBP45.8m (2017: GBP29.3m) with the
increase being mainly due to GBP11.8m of outstanding consideration
in respect of the Spring acquisition and increased capital accruals
in respect of the new global headquarters.
Dividends
The Board declared an interim dividend of 3.42 pence per share
which was paid to shareholders on 12 April 2018. The Board has
proposed a final dividend of 8.58 pence per share, taking the total
dividend for the year to 12.00 pence per share, a 17.9% increase on
the previous year and equating to approximately GBP24.6m. The final
dividend is subject to shareholder approval at the forthcoming
AGM.
The ability of the Group to make dividend payments is determined
by the availability of distributable retained earnings and liquid
cash resources as well as the need for both of these to be held at
the Company level. At 30 June 2018, the Company held retained
earnings of GBP250.5m, the majority of which is distributable. The
Group has cash resources of GBP90.2m at 30 June 2018, of which
GBP67.2m was held by the Company.
Outlook and guidance
The fundamentals of our business remain strong. The revenue
growth this year and in previous years remains a measure of the
continued success of our strategy and provides a solid foundation
from which to invest in the business.
Overall, the outlook for our markets remains positive and we
expect our total constant currency revenue growth for 2018/19 to be
approximately 11%. Beyond this, we anticipate that the investments
we are making, together with our financial strength, will lay the
foundation for growth in 2019/20 and beyond, supporting our
ambition to maintain revenue growth at low double-digit rates over
the medium-term.
In the coming year, alongside our ongoing investment in our
capital projects and scalability, we plan to increase investment in
a number of strategically important areas including R&D, China,
Abcam Inside and data analytics. We are also launching a new share
ownership scheme open to all employees globally, to recognise their
invaluable contribution and to help maintain our entrepreneurial
spirit as we continue to expand. We will look to partly fund these
investments through the continued realisation of efficiencies and
savings in our core business and currently anticipate adjusted
EBITDA margin in 2018/19 will be approximately 36%.
Over time, these investments will increase our capabilities, add
new products and services for our customers and improve our
operational efficiencies, helping us to achieve our ambition to
double our 2016 scale by 2023 and fulfil our mission to help life
science researchers discover more, faster.
Gavin Wood
Chief Financial Officer
Consolidated income statement
For the year ended 30 June 2018
Year ended 30 June Year ended 30 June
2018 2017
==================================== ==== ============================ ============================
Note Adjusted* Adjusting Total Adjusted* Adjusting Total
GBPm items* GBPm GBPm items* GBPm
GBPm GBPm
==================================== ==== ========= ========= ====== ========= ========= ======
Revenue 2 233.2 - 233.2 217.1 - 217.1
Cost of sales (70.2) - (70.2) (65.0) - (65.0)
==================================== ==== ========= ========= ====== ========= ========= ======
Gross profit 163.0 - 163.0 152.1 - 152.1
Selling, general and administrative
expenses (69.8) (8.4) (78.2) (73.5) (4.9) (78.4)
Research and development expenses (11.9) (4.1) (16.0) (14.2) (4.4) (18.6)
==================================== ==== ========= ========= ====== ========= ========= ======
Operating profit 81.3 (12.5) 68.8 64.4 (9.3) 55.1
Finance income 0.3 - 0.3 0.2 - 0.2
Finance costs - - - - (3.4) (3.4)
==================================== ==== ========= ========= ====== ========= ========= ======
Profit before tax 81.6 (12.5) 69.1 64.6 (12.7) 51.9
Taxation 4 (14.9) 8.0 (6.9) (12.6) 3.1 (9.5)
==================================== ==== ========= ========= ====== ========= ========= ======
Profit for the year attributable
to the owners of the parent 66.7 (4.5) 62.2 52.0 (9.6) 42.4
==================================== ==== ========= ========= ====== ========= ========= ======
Earnings per share
Basic earnings per share (pence) 32.7 30.5 25.7 20.9
Diluted earnings per share (pence) 32.4 30.2 25.5 20.7
------------------------------------ ---- --------- --------- ------ --------- --------- ------
* Adjusted figures exclude systems and process improvement
costs, costs associated with the new Group headquarters,
amortisation of acquired intangibles, acquisition costs, the tax
effect of adjusting items, significant tax adjustments in respect
of new US tax legislation and where applicable, contingent
consideration fair value adjustments together with the related
unwinding of the discount on these. Such excluded items are
described as "adjusting items". Further information on these items
is shown in note 3.
Consolidated statement of comprehensive income
For the year ended 30 June 2018
Year ended Year ended
30 June 2018 30 June 2017
GBPm GBPm
---------------------------------------------------------------------- -------------- --------------
Profit for the year 62.2 42.4
Items that may be reclassified to profit or loss in subsequent years
Movement on cashflow hedges 0.2 8.5
Movement on net investment hedge - (0.9)
Exchange differences on translation of foreign operations (1.8) 5.2
Movement in fair value of investment (0.1) 0.2
Tax relating to components of other comprehensive income - (1.6)
---------------------------------------------------------------------- -------------- --------------
Other comprehensive (loss) / income for the year (1.7) 11.4
---------------------------------------------------------------------- -------------- --------------
Total comprehensive income for the year 60.5 53.8
---------------------------------------------------------------------- -------------- --------------
Consolidated balance sheet
As at 30 June 2018
30 June 2018 30 June 2017
GBPm GBPm
Non-current assets
Goodwill 114.2 115.5
Intangible assets 106.3 73.6
Property, plant and equipment 25.1 22.3
Investment 0.9 -
Deferred tax asset 8.4 6.6
Derivative financial instruments - 0.2
------------------------------------------------------- ------------- -------------
254.9 218.2
------------------------------------------------------- ------------- -------------
Current assets
Inventories 29.6 21.8
Trade and other receivables 39.3 34.6
Investment - 1.0
Derivative financial instruments 0.8 1.3
Cash and cash equivalents 90.2 84.8
------------------------------------------------------- ------------- -------------
159.9 143.5
------------------------------------------------------- ------------- -------------
Total assets 414.8 361.7
------------------------------------------------------- ------------- -------------
Current liabilities
Trade and other payables (45.8) (29.3)
Derivative financial instruments (0.5) (2.1)
Current tax liabilities (2.7) (1.2)
------------------------------------------------------- ------------- -------------
(49.0) (32.6)
------------------------------------------------------- ------------- -------------
Net current assets 110.9 110.9
------------------------------------------------------- ------------- -------------
Non-current liabilities
Deferred tax liability (14.0) (21.9)
Derivative financial instruments (0.1) (0.1)
------------------------------------------------------- ------------- -------------
(14.1) (22.0)
------------------------------------------------------- ------------- -------------
Total liabilities (63.1) (54.6)
------------------------------------------------------- ------------- -------------
Net assets 351.7 307.1
------------------------------------------------------- ------------- -------------
Equity
Share capital 0.4 0.4
Share premium 25.6 23.9
Merger reserve 68.1 68.1
Own shares (3.2) (3.6)
Translation reserve 26.3 28.1
Hedging reserve 0.1 (0.1)
Retained earnings 234.4 190.3
------------------------------------------------------- ------------- -------------
Total equity attributable to the owners of the parent 351.7 307.1
------------------------------------------------------- ------------- -------------
Consolidated statement of changes in equity
For the year ended 30 June 2018
Share
Share premium Merger Own Translation Hedging Retained Total
capital account reserve shares reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ========== ========= =========== =========== =============== ========= =========== ============
Balance as at
1 July
2016 0.4 21.5 61.6 (3.2) 23.9 (7.1) 164.1 261.2
============== ========== ========= =========== =========== =============== ========= =========== ============
Profit for the
year - - - - - - 42.4 42.4
Other
comprehensive
income - - - - 4.2 7.0 0.2 11.4
============== ========== ========= =========== =========== =============== ========= =========== ============
Total
comprehensive
income - - - - 4.2 7.0 42.6 53.8
============== ========== ========= =========== =========== =============== ========= =========== ============
Issue of
ordinary
shares - 2.4 6.5 (0.4) - - (0.5) 8.0
Share-based
payments
inclusive of
deferred
tax - - - - - - 3.3 3.3
Purchase of
own shares - - - - - - (0.1) (0.1)
Equity
dividends - - - - - - (19.1) (19.1)
============== ========== ========= =========== =========== =============== ========= =========== ============
Balance as at
30 June
2017 0.4 23.9 68.1 (3.6) 28.1 (0.1) 190.3 307.1
============== ========== ========= =========== =========== =============== ========= =========== ============
Profit for the
year - - - - - - 62.2 62.2
Other
comprehensive
income - - - - (1.8) 0.2 (0.1) (1.7)
============== ========== ========= =========== =========== =============== ========= =========== ============
Total
comprehensive
income - - - - (1.8) 0.2 62.1 60.5
============== ========== ========= =========== =========== =============== ========= =========== ============
Issue of
ordinary
shares - 1.7 - 0.4 - - (0.5) 1.6
Share-based
payments
inclusive of
deferred
tax - - - - - - 4.7 4.7
Purchase of
own shares - - - - - - (0.1) (0.1)
Equity
dividends - - - - - - (22.1) (22.1)
============== ========== ========= =========== =========== =============== ========= =========== ============
Balance as at
30 June
2018 0.4 25.6 68.1 (3.2) 26.3 0.1 234.4 351.7
============== ========== ========= =========== =========== =============== ========= =========== ============
Consolidated cash flow statement
For the year ended 30 June 2018
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
==================================================== ==== ==================== ===================
Operating profit for the year 68.8 55.1
Adjustments for:
Depreciation of property, plant and equipment 4.5 5.6
Amortisation of intangible assets 8.4 9.8
Derivative financial instruments at fair value
through profit or loss (0.7) (1.2)
Loss on disposal of property, plant and equipment 0.2 0.0
Research and development expenditure credit (3.1) (0.7)
Share-based payments charge 3.4 3.9
Contingent consideration change in fair value - (0.9)
Unrealised currency translation (gains) / losses (0.5) 0.1
========================================================== ==================== ===================
Operating cash flows before movements in working
capital 81.0 71.7
Increase in inventories (5.8) (2.1)
Increase in receivables (5.7) (0.8)
Increase in payables 3.4 7.7
========================================================== ==================== ===================
Cash generated from operations 72.9 76.5
Net income taxes paid (9.6) (10.1)
Net cash inflow from operating activities * 63.3 66.4
==================================================== ==== ==================== ===================
Investing activities
Investment income 0.3 0.2
Purchase of property, plant and equipment * (16.4) (10.1)
Purchase of intangible assets * (21.0) (8.9)
Transfer of cash from/(to) escrow in respect
of future capital expenditure * 0.9 (6.1)
Net cash outflow arising from acquisitions (1.5) (9.8)
Sale of term deposits - 1.8
========================================================== ==================== ===================
Net cash outflow from investing activities (37.7) (32.9)
========================================================== ==================== ===================
Financing activities
Dividends paid (22.1) (19.1)
Proceeds on issue of shares 1.6 1.4
Purchase of own shares (0.1) (0.1)
========================================================== ==================== ===================
Net cash outflow from financing activities (20.6) (17.8)
========================================================== ==================== ===================
Increase in cash and cash equivalents 5.0 15.7
Cash and cash equivalents at beginning of year 84.8 68.9
Effect of foreign exchange rates 0.4 0.2
========================================================== ==================== ===================
Cash and cash equivalents at end of year 90.2 84.8
========================================================== ==================== ===================
Free Cash Flow (i) 26.8 41.3
==================================================== ==== ==================== ===================
(i) Free Cash Flow comprises those items marked * and comprises
net cash generated from operating activities less net capital
expenditure and transfer of cash from/(to) escrow in respect of
future capital expenditure.
Notes to the Preliminary Financial Information
For the year ended 30 June 2018
1. Presentation of the financial statements
a) Basis of preparation
The financial information, which comprises the consolidated
income statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity, consolidated cash flow statement and extracts from the
notes to the financial statements for the year ended 30 June 2018
has been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, IFRS
issued by the International Accounting Standards Board and those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS. The financial statements incorporate the results of the
Company and its subsidiary undertakings.
The preliminary financial information has been presented in
Sterling and on the historical cost basis, except for the
revaluation of certain financial instruments.
The financial information does not constitute statutory accounts
within the meaning of Sections 434 to 436 of the Companies Act
2006, but are derived from those accounts. Statutory accounts for
the financial year ended 30 June 2017 have been filed with the
Registrar of Companies and those for the financial year ended 30
June 2018 were approved by the Board of directors on 7 September
2018 and will be delivered in due course. The auditor has reported
on those accounts, their report was unqualified and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
b) Accounting policies
The accounting policies, estimates and judgements adopted
adopted in the preparation of the preliminary financial information
are consistent with those as set out in the Group's financial
statements for the year ended 30 June 2017, with exception of the
following:
Internally developed technology
As scientific technology has continued to evolve, a review was
undertaken during the year of the wider nature of the asset
category previously described as 'Hybridomas and Assays' and in the
first instance the category has been renamed 'Internally developed
technology' to better reflect the broader nature of the assets.
Secondly, it has been concluded that because, in most cases now,
although a physical asset may still exist, because a genetic
sequencing has since been performed, the value now lies within this
sequencing and this is intangible in nature. Accordingly, these
assets have now been reclassified to intangible assets.
Furthermore, the maximum useful economic life has been
reassessed and extended from 8 years to 16 years.
c) Adjusted performance measures
Adjusted performance measures are used by Directors in their
review of the business and exclude certain cash and non-cash items
which they believe are not reflective of the normal course of
business of the Group. The Directors believe that disclosing such
non-IFRS measures enables a reader to isolate and evaluate the
impact of such items on results and allows for fuller understanding
of performance from year to year. Adjusted performance measures may
not be directly comparable with other similarly titled measures
used by other companies. These measures are defined in further
detail together with an explanation of the reasons for their use in
note 10. A detailed reconciliation between reported and adjusted
measures is presented in note 3 which also lists out the adjusting
items individually.
d) Going concern
The Group meets its day-to-day working capital requirements from
the cash surpluses generated as a result of normal trading. In
considering going concern, the Directors have reviewed the Group's
forecasts and projections, taking account of reasonably possible
changes in trading performance. These show that the Group should be
able to operate within the limits of its available resources.
Accordingly, the directors have a reasonable expectation that
the Group has adequate resources to continue in operation for the
foreseeable future and at least one year from the date of approval
of the financial statements. For this reason, they continue to
adopt the going concern basis in preparing its consolidated
financial statements.
2. Operating segments
Products and services from which reportable segments derive
their revenues
The Directors consider that there is only one core business
activity and there are no separately identifiable business segments
which are engaged in providing individual products or services or a
group of related products and services which are subject to
separate risks and returns. The information reported to the Group's
Chief Executive Officer, who is considered the chief operating
decision maker, for the purposes of resource allocation and
assessment of performance is based wholly on the overall activities
of the Group. The Group has therefore determined that it has only
one reportable segment, which is 'sales of antibodies and related
products'. The Group's revenue and assets for this one reportable
segment can be determined by reference to the Group's income
statement and balance sheet.
The Group has no individual product or customer which
contributes more than 10% of its revenues.
Geographical information
Revenues are attributed to countries based on customers'
location. The Group's revenue from external customers and
information about its non-current segment assets (excluding
deferred tax and derivative financial instruments) is set out
below:
Revenue Non-current assets
----------------- ------------------------ ---------------------
Year ended Year ended As at As at
30 June 30 June 30 June 30 June
2018 2017 2018 2017
GBPm GBPm GBPm GBPm
----------------- ----------- ----------- ---------- ---------
US 97.4 91.8 165.2 172.2
China 33.1 26.7 3.2 3.7
Japan 16.4 18.1 0.1 0.1
UK 13.6 12.7 77.9 35.3
Germany 13.4 12.4 - -
Other countries 59.3 55.4 0.1 0.1
----------------- ----------- ----------- ---------- ---------
233.2 217.1 246.5 211.4
----------------- ----------- ----------- ---------- ---------
Revenue by type is shown below:
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
---------------------------------------- ----------- -----------
Catalogue revenue 216.8 202.4
Custom products and licensing revenue* 16.4 14.7
---------------------------------------- ----------- -----------
233.2 217.1
---------------------------------------- ----------- -----------
*Includes custom services, IVD/IHC, royalties and license
income.
3. Adjusted Performance Measures
A reconciliation of the Group's adjusted performance measures to
the reported IFRS measures is presented below:
Year ended 30 June 2018 Year ended 30 June 2017
------------------------------- ------------------------------ ------------------------------
Adjusting Adjusting
Adjusted items Total Adjusted items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- ---------- ------- --------- ---------- -------
EBITDA(*) 88.3 (6.6) 81.7 73.3 (2.8) 70.5
Depreciation and amortisation (7.0) (5.9) (12.9) (8.9) (6.5) (15.4)
------------------------------- --------- ---------- ------- --------- ---------- -------
Operating profit 81.3 (12.5) 68.8 64.4 (9.3) 55.1
Finance income 0.3 - 0.3 0.2 - 0.2
Finance costs - - - - (3.4) (3.4)
------------------------------- --------- ---------- ------- --------- ---------- -------
Profit before tax 81.6 (12.5) 69.1 64.6 (12.7) 51.9
Tax (14.9) 8.0 (6.9) (12.6) 3.1 (9.5)
------------------------------- --------- ---------- ------- --------- ---------- -------
Profit for the period 66.7 (4.5) 62.2 52.0 (9.6) 42.4
------------------------------- --------- ---------- ------- --------- ---------- -------
* EBITDA = Earnings before interest, tax, depreciation and
amortisation
Year ended Year ended
30 June 2018 30 June2017
GBPm GBPm
----------------------------------------------------------------------------------- -------------- -------------
Analysis of adjusting items
Affecting EBITDA
System and process improvement costs (6.1) (3.8)
Costs associated with the new group headquarters (0.3) -
Contingent consideration fair value adjustment - 1.0
Acquisition costs (0.2) -
----------------------------------------------------------------------------------- -------------- -------------
(6.6) (2.8)
Affecting depreciation and amortisation
Amortisation of acquisition related intangible asset (5.9) (5.9)
System and process improvement costs - Impairment - (0.6)
----------------------------------------------------------------------------------- -------------- -------------
(5.9) (6.5)
Affecting operating profit* (12.5) (9.3)
Affecting profit before tax
Finance costs: Unwinding of discount factor on contingent consideration and fees - (3.4)
----------------------------------------------------------------------------------- -------------- -------------
(12.5) (12.7)
Affecting tax
Tax effect of adjusting items 2.8 3.1
Tax benefit arising from new US tax legislation 5.2 -
----------------------------------------------------------------------------------- -------------- -------------
Total adjusting items (4.5) (9.6)
----------------------------------------------------------------------------------- -------------- -------------
* Of which GBP4.1m (2017: GBP4.4m) within Amortisation of
acquisition related intangible assets is included within Research
and development expenses, with the remaining GBP8.4m (2017:
GBP4.9m) included within Selling, general and administrative
expenses.
4. Taxation
Year ended
Year ended 30 June
30 June 2018 2017
GBPm GBPm
----------------------------- -------------- -----------
Current tax 14.4 10.4
Deferred tax (7.5) (0.9)
----------------------------- -------------- -----------
Total income tax charge 6.9 9.5
----------------------------- -------------- -----------
Adjusted income tax charge* 14.9 12.6
----------------------------- -------------- -----------
*Adjusted income tax charge excludes the tax effects of
adjusting items and the impact on tax arising from new US tax
legislation, both of which are set out in note 3.
The effective tax rate on reported profits is 10.0% (2017:18.3%)
and has reduced mainly due to the impacts of the US reform (in
particular the revaluation of deferred tax balances associated with
the Group's acquired intangible assets). The US Tax Cuts and Jobs
Act was signed in December 2017, resulting in a reduction in the US
federal tax rate from 35.0% to 21.0% with effect from 1 January
2018. The effective tax rate on adjusted profits is 18.3% and
excludes the impact of the above.
The UK corporation tax rate for the year was 19.0%
(2017:19.75%). Taxation for other jurisdictions is calculated at
the rates prevailing in the respective jurisdictions.
From April 2020, the UK corporate tax rate will reduce to 17.0%
in line with Finance Act 2016. This 17.0% rate continues to be
applied in the deferred tax valuations based on the expected timing
of when such assets and liabilities will be recovered.
5. Earnings per share
The calculation of the basic and diluted EPS, shown below the
income statement, is based on the following data:
Year ended Year ended
30 June 2018 30 June 2017
GBPm GBPm
Earnings
Profit attributable to equity shareholders of the parent - adjusted 66.7 52.0
--------------------------------------------------------------------- -------------- --------------
Adjusting items (note 3) (4.5) (9.6)
--------------------------------------------------------------------- -------------- --------------
Profit attributable to equity shareholders of the parent - reported 62.2 42.4
--------------------------------------------------------------------- -------------- --------------
Million Million
Number of shares
Weighted average number of ordinary shares in issue 204.8 203.4
Less ordinary shares held by Equiniti Share Plan Trustees Limited (0.6) (0.7)
---------------------------------------------------------------------------- -------- --------
Weighted average number of ordinary shares for the purposes of basic EPS 204.2 202.7
Effect of potentially dilutive ordinary shares: Share options and awards 1.6 1.5
---------------------------------------------------------------------------- -------- --------
Weighted average number of ordinary shares for the purposes of diluted EPS 205.8 204.2
---------------------------------------------------------------------------- -------- --------
Basic EPS and adjusted EPS are calculated by dividing the
earnings attributable to the equity shareholders of the parent by
the weighted average number of shares outstanding during the year.
Diluted EPS and adjusted EPS are calculated on the same basis as
basic EPS but with a further adjustment to the weighted average
number of shares outstanding to assume conversion of all
potentially dilutive ordinary shares. Such potentially dilutive
ordinary shares comprise share options and awards granted to
employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year and any
unvested shares which have met, or are expected to meet, the
performance conditions at the end of the year.
Year ended Year ended
30 June 2018 30 June 2017
---------------------- -------------- --------------
Basic EPS 30.5p 20.9p
Diluted EPS 30.2p 20.7p
Adjusted basic EPS 32.7p 25.7p
Adjusted diluted EPS 32.4p 25.5p
---------------------- -------------- --------------
6. Dividends
Year ended Year ended
30 June 2018 30 June 2017
GBPm GBPm
----------------------------------------------------------------------------- -------------- --------------
Amounts recognised as distributions to the equity shareholders in the year:
Final dividend for the year ended 30 June 2016 of 6.556 pence per share - 13.3
Interim dividend for the year ended 30 June 2017 of 2.825 pence per share - 5.8
Final dividend for the year ended 30 June 2017 of 7.355 pence per share 15.1 -
Interim dividend for the year ended 30 June 2018 of 3.420 pence per share 7.0 -
----------------------------------------------------------------------------- -------------- --------------
Total distributions to owners of the parent in the period 22.1 19.1
----------------------------------------------------------------------------- -------------- --------------
The proposed final dividend is subject to approval of the
shareholders at the forthcoming AGM and has not been included as a
liability in these financial statements.
Year ended
30 June 2018
GBPm
======================================================== =============
Proposed final dividend for the year ended 30 June 2018
of 8.580 pence per share 17.6
======================================================== =============
7. Business combinations
On 22 January 2018 the Group entered into a definitive license
agreement with Roche for consideration of $17.6m (GBP13.0m). Under
the terms of the agreement, the Group obtained the exclusive rights
to the product portfolio of Spring Bioscience Corporation
("Spring"), in the research use only (RUO) field as well as the
exclusive RUO rights for all future products developed for an
initial period of 10 years. As part of the agreement, existing
amounts of inventory also transferred to the Group.
Consideration of $2.1m (GBP1.5m) was exchanged on 30 May 2018. A
liability for the balance of $15.5m (GBP11.8m) is included within
Trade and other payables.
The provisional fair value identifiable assets recognised at the
date of acquisition were as follows:
GBPm
------------------------------------ ------ -----
Non-current assets
Intangible assets (i) 10.9
Current assets
Inventory 2.0
-------------------------------------------- -----
Total identifiable assets acquired 12.9
Goodwill 0.1
-------------------------------------------- -----
Total Consideration (ii) 13.0
------------------------------------ ------ -----
(i) Comprises GBP10.4m attributable to the license agreement and
GBP0.5m to customer and distributor relationships. (ii) Acquisition
related expenses totalling GBP0.2m are included within Selling,
general and administrative expenses.
8. Capital commitments
Future capital expenditure
Year ended Year ended
30 June 2018 30 June 2017
GBPm GBPm
--------------------------------- -------------- --------------
Contracted for but not provided 5.8 6.3
--------------------------------- -------------- --------------
Amounts relate predominantly to amounts held in escrow to fund
payments to be made to contractors in respect of the construction
of the Group's new global headquarters on the Cambridge Biomedical
Campus.
9. Alternative performance measures
The Group's performance is assessed using a number of financial
measures which are not defined under IFRS and are therefore
non-GAAP (or alternative) performance measures. These are set out
as follows:
-- CER is a measure which allows management to identify the
relative year-on-year performance of the business by removing the
impact of currency movements which are outside of management's
control.
-- EBITDA is a metric used to provide an approximation of cash
generation from operating activities and is reconciled to its IFRS
equivalent profit metric in note 3 to the financial
information.
-- Margin percentages (which are calculated by dividing the
relevant profit figure by revenue) for each of the relevant profit
metrics provide management with an insight into relative year on
year performance.
-- Adjusted profit measures, as described in note 1(c) to the
financial information, are believed by the Directors to enable a
reader to obtain a fuller understanding of underlying performance
since they exclude items which are not reflective of the normal
course of business. Furthermore, such measures are reflective of
how performance is measured internally including targets against
which compensation is determined. Adjusted profit measures are
derived and reconciled to their reported IFRS equivalent on the
face of the consolidated income statement as well as in note 3 to
the financial information.
Key adjusted income statement measures are: adjusted EBITDA,
adjusted operating profit and adjusted profit before tax.
Adjusting items (which are excluded to arrive at adjusted
performance measures) are also described on the face of the income
statement and in note 3 to the financial information.
-- Adjusted earnings per share measures are derived from
adjusted profit before tax with the rationale for their use being
the same as for adjusted profit metrics and are reconciled to their
IFRS equivalent in note 5 to the financial information.
-- Free Cash Flow is defined on the face of the consolidated
cash flow statement and provides management with an indication of
the amount of cash available for discretionary investing or
financing after removing capital related items.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFSFSSFASEFU
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