2012 Annual Report

Transcription

2012 Annual Report

Innovative solutions
for safe environments
Bioquell PLC
ANNUAL REPORT AND ACCOUNTS 2012
CREATING SAFE
OPERATIONAL
ENVIRONMENTS
The Bioquell Group offers sophisticated solutions
for bio‑decontamination and a range of
comprehensive testing services via TRaC
Every day our world-leading, innovative
technologies and services help create safe working
environments for a diverse range of markets
BIO:
QUELL:
Of, relating to, caused
by, or affecting life or
living organisms; biological
processes such as growth
and digestion
Suppress, forcibly put an
end to, crush, overcome,
reduce to submission
1
Bioquell PLC
ANNUAL REPORT AND ACCOUNTS 2012
HIGHLIGHTS
Overview
FINANCIAL
REVENUE (£M)
£41.0m
11
12
Business review
10
£41.0m
09
£41.3m
£39.4m
08
£39.2m
£34.4m
Group orders: £44.6 million (2011: £44.5 million)
Group orders ex defence activities: £43.8 million
(2011: £38.2 million), up 14%
Group revenues: £41.0 million (2011: £41.3 million)
Group revenues ex defence activities: £40.0 million
(2011: £37.0 million), up 8%
TRaC orders £17.6 million (2011: £14.9 million), up 18%;
TRaC revenues £15.1 million (2011: £13.6 million), up 11%
Profit before tax of £4.0 million (2011: £5.0 million),
reflecting business model change
Earnings per share up 3% to 9.6 pence (2011: 9.3 pence)
Net cash generated from operating activities
£6.0 million (2011: £6.4 million)
Net cash of £1.9 million (2011: £4.0 million);
net assets £30.7 million (2011: £27.6 million)
Proposed dividend increased by 8% to 3.06 pence
per share (2011: 2.83 pence)
EARNINGS PER SHARE (P)
9.6p
12
Corporate governance
9.6p
11
5.8p
9.3p
10.3p
9.0p
08
OPERATIONAL
Bio‑decon division continues to enjoy high export
revenues (2012: 80% of divisional revenues)
Broad range of products launched during the year:
ICE‑pod, QUBE, IG‑1, biological & chemical indicators
Strong demand for the ICE‑pod which is used in
hospitals to provide a standalone room which can
also be ‘bioquelled’
TRaC had an excellent year – and is well placed for
further growth
09
10
DIVIDEND PER SHARE (P)
3.06p
11
12
Financial statements
3.06p
10
2.83p
09
2.62p
2.42p
2.20p
08
OVERVIEW
FINANCIAL STATEMENTS – GROUP
Highlights 1
Independent Auditors’ report
26
FINANCIAL STATEMENTS – COMPANY
Company balance sheet
55
28
Notes to the Company financial statements
56
Bioquell at a glance
2
Consolidated income statement
Chairman’s statement
4
Consolidated statement of comprehensive income 28
BUSINESS REVIEW
Business review: Bio‑decontamination
6
Consolidated balance sheet
29
SHAREHOLDER INFORMATION
Consolidated statement of changes in equity
30
Bioquell Group directory
Consolidated cash flow statement
31
Business review: TRaC
10
Notes to the consolidated financial statements
32
Risks and uncertainties
12
Five year summary
54
IBC
CORPORATE GOVERNANCE
Directors and advisers
15
Directors’ report
16
Corporate governance
19
Directors’ remuneration report
21
Statement of Directors’ responsibilities
25
FOR MORE INFORMATION ON BIOQUELL PLC,
PLEASE VISIT US AT WWW.BIOQUELLPLC.COM
2
Bioquell PLC
BIOQUELL AT A GLANCE
INNOVATIVE SOLUTIONS,
WORLD CLASS EXPERTISE
BIO‑DECONTAMINATION DIVISION
We design, develop
and manufacture specialist
decontamination
equipment – and provide
specialist services – for
three core sectors.
LIFE SCIENCES
HEALTHCARE
Bioquell’s hydrogen peroxide vapour
(“HPV”) equipment has long been the
bio‑decontamination technology of
choice within the biotech, biomedical,
biologics and pharmaceutical sectors.
A range of equipment and services
are available that are designed to
provide bio‑decontamination of
equipment, rooms or entire facilities.
Bioquell’s technology is proven
to be effective against a wide range
of environmentally‑associated
nosocomial pathogens. Bioquell’s
technology can be deployed
in a variety of ways, including
bespoke decontamination
services to suit the particular
needs of healthcare providers.
Bioquell is also developing
bioburden reduction technology
for hospital pharmacies and
wound‑care (BioxyQuell).
BIO‑DECONTAMINATION
SPLIT REVENUE BY GEOGRAPHY
DEFENCE
80%
OVERSEAS
COMPARED WITH 20%
UNITED KINGDOM
READ MORE ABOUT THIS
DIVISION ON PAGE 6
Bioquell provides Chemical,
Biological, Radiological and
Nuclear (“CBRN”) defence filtration
technology to the defence sector
for use in military vehicles and fixed
installations. Additionally Bioquell’s
HPV technology can be used to
eradicate biological and chemical
agents from key military assets,
including sensitive equipment
and critical facilities.
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Bioquell PLC
Overview
The Bioquell Group offers comprehensive state‑of‑the‑art
bio‑decontamination solutions and for a broad range of industries
and applications.
TRaC facilitates high‑level testing on behalf of a diverse range
of clientele, ranging from multi‑nationals to government bodies.
Business review
TRAC DIVISION
TRaC provides specialist
testing, regulatory and
compliance services to
organisations principally
based in the UK.
TRaC provides performance and
approvals services for telecoms,
radio (wireless) and broadband
products for compliance
against worldwide standards.
RADIO
ENVIRONMENTAL
TRaC is constantly working to be
one step ahead of the rapidly
changing radio testing and
certification market.
TRaC’s environmental laboratories
provide unrivalled comprehensive
independent and confidential testing.
SAFETY
ANALYSIS
TRaC provides a comprehensive
range of test, assessment and
certification routes to ensure
products demonstrate
full compliance with international
safety requirements.
We provide leading engineering
consultancy in static and dynamic
structural analysis using Finite Element
Analysis (“FEA”) techniques.
87%
UNITED KINGDOM
COMPARED WITH
13% OVERSEAS
READ MORE ABOUT THIS
DIVISION ON PAGE 10
SPLIT REVENUE BY GEOGRAPHY
TELECOMS
TRaC provides Electromagnetic
Compatibility (“EMC”) and electrical
safety testing to demonstrate
conformity with regulatory
requirements for a range of markets.
TRAC DIVISION
EMC
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Bioquell PLC
CHAIRMAN’S STATEMENT
BUSINESS MODEL DRIVEN BY
CAPTIVE CONSUMABLES AND
OTHER RECURRING REVENUES
The headline figures for the year – orders of £44.6 million
(2011: £44.5 million), revenues of £41.0 million (2011: £41.3 million)
and after‑tax profit of £4.0 million (2011: £3.9 million) were
held back by the headwind we encountered in our defence
business where, as previously announced, defence sales were
£3.3 million less than in the previous year and defence orders
were £5.5 million less than in 2011. Group orders excluding
defence activities were £43.8 million (2011: £38.2 million), up
15%. Similarly, Group revenues excluding defence activities
were £40.0 million (2011: £37.0 million), up 8%. TRaC
performed well during the year and the significant changes
we have made to the Bio‑contamination control (Bio‑decon)
division’s business model are expected to have a significant
effect on future results.
Service‑related activities continue to be important to
the Group, with service revenues totalling £25.2 million
(2011: £24.4 million), representing 61% (2011: 59%) of
consolidated revenues. Our export revenues are also
significant representing 55% (2011: 57%) of Group revenues.
In 2012 the Bio‑decon division recorded orders of
£27.0 million (2011: £29.6 million). (Orders excluding
defence activities were £26.2 million (2011: £23.3 million).)
Bio‑decon revenues were £25.9 million (2011: £27.7 million)
– which represented 63% of the Group’s revenues
(2011: 67%). (Bio‑decon revenues excluding defence
activities were £24.9 million (2011: £23.4 million).)
Service‑related revenues within the Bio‑decon division
were 39% (2011: 39%) and export‑related revenues were 80%
(2011: 77%) of the division’s annual revenues. Customers in
the Life Sciences sector represented 84% (2011: 74%) of the
Bio‑decon division’s revenues. Currently the Life Sciences
sector remains by far the largest contributor to the division’s
revenues, although we expect this to reduce over time as
our Healthcare business grows.
Defence orders were £0.8 million (2011: £6.3 million).
Defence revenues were also substantially lower than the
previous year at £1.0 million (2011: £4.3 million), reflecting
the delivery schedules on our defence order book.
TRaC had a good year with orders up 18% to £17.6 million
(2011: £14.9 million) and revenues up 11% to £15.1 million
(2011: £13.6 million).
The Bio‑decon division’s profitability was held back by
lower levels of defence revenues and relatively subdued
Life Sciences‑related equipment sales into certain
territories. In contrast TRaC’s profitability continued
to improve. Group profit before tax was £4.0 million
(2011: £5.0 million).
Group earnings per share were up 3% at 9.6 pence
(2011: 9.3 pence), reflecting a lower tax charge relating to our
substantial expenditure on product development in the year
of £3.8 million (2011: £2.0 million), representing 9% of Group
and 15% of Bio‑decon revenues, respectively.
The Group continues to have a strong balance sheet with
net cash at the year end of £1.9 million (2011: £4.0 million)
and net assets of £30.7 million (2011: £27.6 million).
Over the last few years we have set out to change the way
we deliver our technology to our customers. Our business
had become too dependent on capital expenditure‑related
hydrogen peroxide vapour (HPV) bio‑decontamination
equipment orders, with no other associated recurring
revenues. In addition, our Defence business is ‘lumpy’
leading to the profitability of the Group often being
disproportionately affected by the results from our Defence
activities. To counteract this in the Bio‑decon division we
aim to increase significantly the proportion of recurring or
usage‑based revenues. Following the investments we have
made over the previous three years, in 2012 we launched
a number of products and services which have been
designed to increase the Bio‑decon division’s proportion
of recurring revenues, including:
hh
launch of the ICE‑pod which is a standalone room
product for hospitals provided on a rental basis;
hh
launch of the highly innovative QUBE (incorporating
captive peroxide consumables);
hh
launch of the IG‑1 HPV equipment (incorporating
captive consumables);
hh
expansion of our range of hydrogen peroxide
consumable cartridges; and
hh
launch of range of biological and chemical indicators
(consumables, for use with our HPV equipment).
These products were launched at the end of 2012 and
orders and revenues are beginning to increase. Demand
for the ICE‑pod has been particularly strong. We are in the
process of re‑configuring our business, which is likely to
require some additional investment, to enable us to satisfy
increasing UK and overseas demand. We anticipate that
the ICE‑pod will act as a conduit for our other HPV‑related
products and services.
The effect on Group revenue from these new products
is not expected to be significant until the second half
of the year.
5
Bioquell PLC
NET ASSETS
CAPITAL INVESTMENT
(2011: £24.4m)
(2011: £27.6m)
(2011: £6.0m)
£25.2m
£30.7m
Although TRaC’s clients largely comprise UK companies,
many of the larger customers – such as those in aerospace
– end up exporting their products and as a result TRaC’s
business benefits from large export markets.
TRaC continues to invest in specialist test equipment
in order to improve the service offering it provides to
its clients and to differentiate itself from its competitors.
Having invested substantially in its facilities over recent
years TRaC is generating increasing amounts of cash from
its activities. TRaC is also using the knowledge of its highly
expert engineers to provide consultancy services to its
clients, via its Early Stage Qualification (ESQ) business.
TRaC believes that there continue to be exciting opportunities
for further growth in the United Kingdom. For example, there
should be opportunities to expand and sell its services into
the medical devices sector.
PROSPECTS AND OUTLOOK
2012 was a challenging year for our Bio‑decon division
as we made major changes to our business model. These
changes are now for the most part complete. We have
launched a number of new products which benefit from
captive consumable and other recurring revenues, and
which are designed to increase significantly the quality
of the Group’s earnings as well as being margin enhancing
in the future.
In 2013 the Bio‑decon division is expected to increase
substantially its revenues generated from the Healthcare
sector – in large part as a result of strong demand for the
ICE‑pod which is requiring us to invest in and reconfigure
parts of our business to enable us to satisfy demand.
TRaC is well positioned for further growth and has started
the year well.
The Group has a strong balance sheet and has the financial
resources available to support high levels of organic
growth, including for the ICE‑pod which is a rental product.
NIGEL KEEN
Chairman
Bioquell PLC
19 March 2013
The TRaC division provides highly specialist testing,
regulatory and compliance services to a broad range
of UK‑based clients. The majority of TRaC’s revenues
are generated from services which help clients satisfy
regulatory requirements. We are also focussing TRaC’s
growth on markets & sectors where there are likely to
be ongoing and increasingly onerous regulations.
I would like to take this opportunity to thank all the Group’s
talented employees for their hard work during the year.
We expect that the recent and well publicised difficulties
associated with the provision of biologically‑contaminated
intravenous drugs in the USA, which has so far resulted in
722 cases and 50 deaths, will emphasise the need for our
new QUBE product which provides a low cost stand‑alone
work‑station for use in pharmacies and was designed specifically
for the preparation of intravenous and other medicines.
Your Board is recommending the payment of a final
dividend of 3.06 pence per share (2011: 2.83 pence),
representing an increase of 8%. The final dividend will
be payable on 1 July, 2013 to shareholders on the register
on 7 June, 2013. Bioquell PLC currently does not pay interim
dividends and it is the Board’s current intention only to
propose the payment of a final dividend each year.
Business review
The Board believes that the market for Bioquell’s
products and services in the Healthcare sector should be
substantially larger than the revenues that can be derived
from the Life Sciences sector. We also know that Healthcare
providers, particularly in the emerging markets, are
experiencing significant challenges from the increasing
antibiotic resistance of Gram‑negative bacteria. The
combination of our HPV technology and our new ICE‑pod
systems (which allow the creation of individual vapour‑tight
standalone rooms within existing open plan hospital wards)
provides hospitals with an attractive range of solutions to
help them combat the increasing and very real problems
associated with drug‑resistant bacteria.
£6.9m
Overview
SERVICE REVENUE
6
Bioquell PLC
BUSINESS REVIEW: Bio‑decontamination
WORLD LEADING SUPPLIERS
OF INNOVATIVE SOLUTIONS
IN SUMMARY
The Group’s Bio‑decontamination division
is the world leader in providing solutions
based on hydrogen peroxide vapour
technology to eradicate problematic bacteria,
viruses and fungi, throughout a wide range
of applications. It also provides Chemical,
Biological, Radiological and Nuclear defence
filtration technology and specialist
laboratory filtration equipment. The division
principally sells into the Life Sciences,
Healthcare and Defence sectors.
BIO‑DECONTAMINATION REVENUE
£25.9m
(2011: £27.7m)
PERFORMANCE IN BRIEF
7% growth in the Group’s Life
Science revenues.
Bioquell launched a number of new
products into the Life Sciences market:
the integrated generator (IG‑1), the
QUBE, biological indicators (BIs), and
chemical indicators (CIs).
The Group’s BioxyQuell technology
is starting to be used to treat patients
with chronic wounds such as venous
leg ulcers via its Salve Programme.
There are two divisions within the Bioquell Group:
Bio‑contamination control (Bio‑decon) – with revenues of
some £25.9 million (2011: £27.7 million); and TRaC: Testing,
Regulatory and Compliance – with revenues of some
£15.1 million (2011: £13.6 million).
BIO‑DECON DIVISION
The Bio‑decon division provides proprietary
technology‑based solutions to its customers:
1)in the Life Sciences sector, to help them develop,
produce and deliver efficiently (including satisfying
relevant regulatory requirements) and safely
pharmaceutical products which could be affected
by microbiological contamination; and
2)in the Healthcare sector, to help them protect their
patients from Hospital Acquired Infection (HAI) by
eradicating the pathogens responsible for HAI – with
a particular focus on the extensively antibiotic resistant
Gram‑negative bacteria – and by providing them with
our ICE‑pod solution to improve standard infection
control measures.
In parallel with these two primary objectives, the
Bio‑decon division is also working to ensure that it
grows the proportion of recurring or usage‑based
revenues generated from its products and services.
The hospital and compounding pharmacy market is also
of significant strategic interest to the Bio‑decon division as
these customers effectively straddle the interface between
the Life Sciences and Healthcare sectors. We are also
starting to provide novel wound‑care therapy via our
BioxyQuell technology.
LIFE SCIENCES
The Bio‑decon division sells Bioquell hydrogen peroxide
vapour (HPV) bio‑decontamination equipment and services
to a broad range of customers in the Life Sciences sector,
including organisations involved with pure research, drug
trials, quality assurance and large scale production
(including generics and contract manufacturing).
Bioquell’s Life Sciences business is currently substantially
the largest contributor of revenues and profits to the
Bio‑decon division, representing in 2012 some 84%
of the division’s revenues (2011: 74%).
The Life Sciences market is large, diverse and international
– and generally benefits from high levels of investment.
It is also subject to extensive and onerous regulatory
7
Bioquell PLC
Overview
Last year we saw 7% growth in the Group’s Life Science
revenues. In the future we believe that the increasing
proportion of biologically sensitive drugs on the market
and more onerous regulatory scrutiny will help drive
up Bioquell’s revenues in this sector.
In order to increase the quality and assurance of the
bio‑decontamination process as well as to increase the
Group’s recurring revenues, Bioquell has expanded the
range of hydrogen peroxide consumable cartridges it sells
to its Life Sciences customers for use with both Bioquell’s
new products and the older products which are in use at
customers’ facilities. Many of these peroxide consumables
incorporate a RFID label which helps the customer with
traceability (which is often a regulatory requirement) and,
in the case of more recent products, these RFID labels also
help Bioquell protect its consumable revenue streams as
the new equipment will only function if it recognises an
approved Bioquell consumable cartridge.
In 2012 Bioquell launched a number of new products into
the Life Sciences market:
hh
biological indicators (BIs) which typically contain
one million non‑pathogenic bacterial spores in a
vapour‑permeable pouch are used to determine whether
a bio‑decontamination process has been successful.
Regulatory bodies require the use of BIs to validate the
efficacy of bio‑decontamination processes. Recently
the market has encountered significant challenges with
unreliable BIs, giving inconsistent process cycle results.
BIs are key to successful validation and hence are critical
to the success of Bioquell’s HPV bio‑decontamination
technology. We are seeing strong interest from the
market in Bioquell’s new range of BIs both for use in
conjunction with our own equipment and for other
applications; and
hh
chemical indicators (CIs) allow our customers to get
an indication of the efficacy of a bio‑decontamination
process without having to wait for BIs to be incubated,
which takes a minimum of 24 hours. Properly engineered CIs
can give a real‑time indication, based upon colour‑change
chemistry, of the performance characteristics of a
bio‑decontamination process. The use of CIs should reduce
the time taken for validation – which will save customers
money and bring research and production facilities on‑line
more rapidly. The use of CIs should also enable customers
to gain comfort that the HPV process is working as expected.
We believe that these new products are highly complementary
to each other and help provide unique, and hence differentiated,
solutions for our Life Science customers – which in turn we
anticipate will help drive up our Life Science revenues across
the range of products we supply.
In the future as new gene or stem‑cell therapy drugs
start to enter the market then we expect there to be
an expanding market for Bioquell’s unique and focussed
bio‑decontamination solutions.
hh
the QUBE provides our Life Sciences customers with
an aseptic work‑station which can be used for sterility
test work, small scale production runs or more general
bio‑pharmaceutical research. The QUBE incorporates
a number of Bioquell’s consumables. The QUBE
comprises highly complex, innovative equipment which
has required, among other things, the development of new
manufacturing techniques and which has been designed to
exploit novel technology to make aseptic manipulation and
processing easier and less expensive for our customers;
A substantial proportion of new high‑margin on‑patent
bio‑pharmaceutical drugs are susceptible to biological
contamination – and it is these new and important
drugs which provide increasing opportunity to Bioquell.
Historically non‑biological drugs could be sterilised at the
end of the production process. However, in the case of
biologically‑derived drugs, terminal sterilisation would
damage the therapeutic benefit of the drugs; accordingly
such drugs need to be manufactured under aseptic
conditions throughout each stage of the production
process. Further, drug manufacturers usually need to
take proactive measures – such as carrying out sterility
tests – to demonstrate that their bio‑pharmaceutical
drugs have been produced under sterile conditions.
hh
the integrated generator (IG‑1) was designed to enable
original equipment manufacturers (OEMs) to incorporate
Bioquell’s HPV bio‑decontamination equipment into their
products in order to carry out residue‑free, low temperature
surface sterilisation. The IG‑1 incorporates a RFID‑protected
captive consumable. We expect the number of IG‑1s sold
to OEMs to increase significantly over the next few years;
Business review
requirements. For example the US regulator, the Food &
Drug Administration, inspects drug manufacturing facilities
throughout the world. Drug manufacturers need to comply
with US or EU regulatory requirements to be allowed to
sell their drugs into these markets. Accordingly there
is substantial and increasing focus by pharmaceutical
companies on ensuring that their facilities – whether
pure research, drug evaluation or production – comply
with the relevant international regulatory requirements.
8
Bioquell PLC
BUSINESS REVIEW: Bio‑decontamination continued
SPEARHEADING RESEARCH ON
AN INTERNATIONAL PLATFORM
The Group continues to believe that there
are interesting opportunities for the treatment
of chronic wounds with its BioxyQuell
technology. Chronic wounds are becoming
more frequent due to an ageing population
and increasing obesity rates. Work is ongoing
in the UK to establish an optimised commercial
model for BioxyQuell and the Salve
Programme. Work is also ongoing with the
relevant US regulators to establish the optimal
regulatory pathway for BioxyQuell in the USA.
HEALTHCARE
Notwithstanding extensive investment in research
with leading international hospitals, to date Bioquell’s
healthcare business has been substantially smaller than
its Life Sciences business. The major issues that hospitals,
particularly in the emerging markets, are beginning to
see with highly antibiotic resistant strains of bacteria will,
we anticipate, drive strong future growth in our healthcare
business. This will be supported by our improved and
expanded product offering for hospitals.
Bioquell’s healthcare business currently comprises three
key products:
hh
HPV bio‑decontamination technology – which is used
to eradicate pathogens, including multidrug‑resistant
organisms, responsible for HAI from the hospital
environment. Bioquell generates service, equipment
and consumable‑related revenues from its HPV
bio‑decontamination activities in the healthcare sector;
hh
Infection Control Enclosure pod (ICE‑pod) – which
enables hospitals to convert open, multi‑bed units
(sometimes known as Nightingale wards) into standalone
rooms in order to reinforce standard infection control
measures as well as to facilitate the rapid ‘bioquelling’
of the bed‑space. The ICE‑pods are usually only
available to hospitals on a service/rental basis; and
hh
the QUBE – which is used in hospital or compounding
pharmacies to facilitate the rapid and safe preparation
of biologically sensitive, toxic and/or intravenous drugs
for patients.
In addition the Group’s BioxyQuell technology is starting to
be used to treat patients with chronic wounds such as venous
leg ulcers via its Salve Programme which it has established
in conjunction with a local primary care provider.
THE EMERGING THREAT FROM HIGHLY ANTIBIOTIC
RESISTANT BACTERIA
“MRSA” and “superbugs” are now well known terms
in the United Kingdom. However, the general public is
typically unaware that there are now a number of highly
antibiotic‑resistant pathogenic bacteria thought to have
evolved over recent years, in large part due to the misuse
of antibiotics in a number of countries, particularly in the
emerging markets. For example, extensively resistant
Gram‑negative bacteria – such as Acinetobacter baumannii,
Pseudomonas aeruginosa and Klebsiella pneumoniae –
are causing major issues in Intensive Care Units (and
other high risk units such as oncology and transplants).
Bioquell PLC
9
The World Economic Forum (WEF), a highly respected Swiss
Foundation, has included the emergence of multidrug‑resistant
bacteria as being one of three risk cases in its Global Risks 2013
report1 entitled ‘The Dangers of Hubris on Human Health’.
The WEF comments:
ICE‑POD: INFECTION CONTROL ENCLOSURE
Bioquell’s ICE‑pod enables hospitals to convert rapidly open
multi‑bed wards into standalone rooms. There is strong
evidence that single rooms help reduce HAI. There is also
evidence that the use of HPV reduces HAI rates. Further, patients
usually prefer single rooms for reasons of privacy and dignity.
Bioquell’s bespoke ICE‑pod rental package provides hospitals
with a convenient solution to address these HAI‑related issues.
Overview
For more than a decade Bioquell has spearheaded research
internationally which has shown that the hospital environment can
readily become contaminated with pathogenic bacteria and that
such microbiological contamination is involved in the transmission
of infection. Published research papers also show that Bioquell’s
HPV technology eradicates successfully pathogens from the
hospital environment and such eradication has been shown
to reduce HAI rates. In January 2013 a scientific paper2 from
a research group at Johns Hopkins Hospital (Baltimore, MD),
one of America’s top hospitals, showed that patients admitted
to rooms bio‑decontaminated using Bioquell’s HPV technology
were 64% less likely to acquire HAI.
To date Bioquell has not made a meaningful return on its
significant investment in research work in the healthcare sector
and the associated technology developed to eradicate
pathogens responsible for HAI. However, we believe that
the nature and extent of this antibiotic‑resistance problem
is changing rapidly – and there will be increasing demand for
Bioquell’s technologies – particularly in the emerging markets.
1 http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2013.pdf
2 Passaretti C.L. et al., ‘An Evaluation of Environmental Decontamination With
Hydrogen Peroxide Vapor for Reducing the Risk of Patient Acquisition of
Multidrug-Resistant Organisms’; Clinical Infectious Diseases, 2013;56:27-35.
DEFENCE
Bioquell has been involved in the design and manufacture
of Chemical, Biological, Radiological and Nuclear (“CBRN”)
filtration equipment for some fifty years. Our specialist
filtration technology is cost effective and has a long and
high quality track record.
During 2012 our defence engineers worked on CBRN filtration
systems for a number of vehicle programmes including for the
UK’s Ministry of Defence Scout SV programme and a new
vehicle for the Malaysian Government.
Our defence business by its nature is relatively “lumpy” – which
tends to result in large year‑on‑year swings in revenues and
profits. We are pursuing a number of initiatives to try and
reduce the volatility of our defence revenues.
The “killer bacteria” referred to above include Gram‑negative
bacteria which in large parts of the world are either untreatable
by all antibiotics currently on the market or are only susceptible,
at the moment, to one antibiotic.
Antibiotic resistance already kills around 100,000 Americans,
80,000 Chinese and 25,000 Europeans a year, according
to figures from the past four years, which are likely to be an
underestimate. In the 10‑year time period covered by the Global
Risks report, it is far from unrealistic to project a significant
spread of antibiotic‑resistant bacteria with high mortality rates.”
USE OF BIOQUELL’S QUBE IN THE HOSPITAL AND
COMPOUNDING PHARMACY SECTOR
We continue to see increasing interest for our recently launched
and innovative QUBE product which allows users to manipulate
products, components and reagents under sterile conditions.
This unique product incorporates novel manufacturing
techniques developed by Bioquell. We are seeing interest
for the QUBE in the Healthcare sector from hospital and
compounding pharmacies. We are also seeing demand for the
QUBE from the Life Sciences sector for sterility test and general
bio‑pharmaceutical research activities. We believe that there
should be particular opportunities for the QUBE in the USA
which has recently experienced a major problem associated
with microbiologically‑contaminated intravenous drugs
prepared by a compounding pharmacy based in Massachusetts
which has resulted in 722 cases of Fungal Meningitis and
50 deaths. This incident is likely to change the way in which
hospital and compounding pharmacies are managed and
regulated in the future in the USA.
Business review
“Until now, leaders have been able to turn a blind eye to this
problem, as new antibiotics have always emerged to replace older,
increasingly ineffective ones. This is changing; since 1987, we have
fallen into a discovery void of any new antibiotics. Although several
new drugs for fighting bacteria are in development, experts
caution that we are decades behind in comparison with the
historical rate at which we have discovered and developed new
antibiotics. More worryingly, none of the drugs in the pipeline
would be effective against certain killer bacteria.
10
Bioquell PLC
BUSINESS REVIEW: TRaC
A BROAD PORTFOLIO
OF TESTING SERVICES
IN SUMMARY
TRaC – the Group’s Testing, Regulatory and Compliance
division – performed well in 2012 and is working on a number
of interesting opportunities which are expected to result in
further growth in 2013.
TRaC is a National Certification Body and many of its employees
are highly expert in their field. TRaC continues to invest in its
employees, recognising that they fulfil a key role in this
knowledge‑based service‑business.
The TRaC division is the largest test and
certification company of its kind, providing a
comprehensive range of services that include
environmental testing, telecoms testing, radio
testing, EMC testing, safety testing, CE Mark
testing and stress analysis. It also holds a
substantial range of accreditations to issue
product approvals to national and international
standards. The division principally sells into
the military, aerospace and telecoms sectors.
TRaC has grown substantially since it was created in 2005 and its
business model and service offerings have evolved significantly.
TRaC originated from the amalgamation of two specialist test
businesses with different UK‑leading expertise: one was expert
in electromagnetic compatibility (EMC) testing and the second
was expert in environmental testing, which principally comprises
physical vibration and shock testing. From these two core testing
disciplines, TRaC has developed over recent years a broad
portfolio of testing services including telecoms, safety, radio
and explosive atmospheres.
TRaC REVENUE
Substantially all of the testing services which TRaC now carries
out are mandated, directly or indirectly, by regulatory bodies.
TRaC’s strategy is to continue to expand its business into areas
or sectors which are supported by high, and likely to increase,
regulatory oversight. This should result in increased demand and
higher revenues for testing, regulatory and compliance services.
£15.1m
(2011: £13.6m)
PERFORMANCE IN BRIEF
TRaC performed well in 2012 and is
working on a number of interesting
opportunities which are expected
to result in further growth in 2013.
TRaC has six well‑invested facilities
located throughout the UK.
For approximately two years TRaC
has been proactively developing
consultancy services which draw upon
the substantial experience of its own
highly skilled technicians and engineers.
TRaC is able to provide regulator‑mandated testing and
compliance services for products sold in the United Kingdom –
and by extension throughout the EU. In addition, many of TRaC’s
clients need regulatory approval to enable them to sell their
products in other countries. Accordingly, wherever possible
TRaC seeks to provide services for its clients’ products
covering multiple international jurisdictions, often by working in
collaboration with in‑country test and compliance organisations.
Most of TRaC’s clients are companies or organisations based in
the United Kingdom which are involved in the development of
products or new technologies. Although this UK‑centric client
base could suggest that TRaC’s activities are closely correlated
with the health of the UK economy, in practice many of TRaC’s
clients are substantial multi‑national corporations with high levels
of export sales; hence TRaC has exposure to interesting and
attractive export markets.
Many UK companies involved in the aerospace industry
currently have large order books and are enjoying robust
trading conditions, largely fuelled by strong exports. Equally,
products which are incorporated into, or are used indirectly by,
aircraft are subject to, among other things, onerous EMC and
environmental regulations. Some of these regulations are
11
Bioquell PLC
Overview
TRaC developed its ESQ business from its existing Finite Element
Analysis (FEA) consultancy business which uses sophisticated
software to model the vibration characteristics of a client’s
product. Appropriate use of FEA at an early stage of product
development can help products pass environmental tests.
As TRaC becomes larger – and by many measures it is already the
largest specialist test organisation of its type in the UK – it is able
to offer more substantial and all‑encompassing ‘turn‑key’ testing
service‑solutions to the large multi‑national corporations
operating in the United Kingdom. Although these multi‑nationals
are sensitive to price, they tend to be equally focussed on
ensuring that their test and regulatory compliance partner
is able to provide them with a high quality, well invested,
professional and responsive service. TRaC has already
established client‑dedicated test facilities at certain of its facilities
– which allow large clients with complex testing requirements
to manage better their test programmes, including the use
Currently TRaC has one regulatory support coordinator located
in China. TRaC does not anticipate investing in physical test
facilities in China – but it does believe that there should
be opportunities for collaboration with equivalent test
organisations in China.
NICK ADAMS
Group Chief Executive
19 March 2013
For approximately two years TRaC has been proactively
developing consultancy services which draw upon the substantial
experience of its own highly skilled technicians and engineers.
For example its Early Stage Qualification (ESQ) business has
been developed to assist clients at the design stage of a new
product development programme to help optimise the chances
of the product passing the relevant EMC and environmental
testing requirements.
TRaC also believes that in line with its strategy of focussing on
sectors where there are strong regulatory imperatives and/or
onerous regulatory regimes to support client demand, there
are good growth opportunities for its consultancy and testing
businesses in the medical device sector. The medical device
sector tends to be international and medical device products
are typically subject to demanding regulatory approvals.
As a result companies developing products in this sector
usually have substantial budgets already ear‑marked for
regulatory compliance. TRaC has started to collaborate with
a number of organisations involved in the medical device
sector and believes that it can become an important source
of revenues for TRaC in the future.
TRaC has six well‑invested facilities located throughout the UK.
The broad geographical distribution of its locations gives TRaC
a competitive advantage as most clients prefer to keep their
engineers and products‑for‑test close to their own facilities
for reasons of convenience and efficiency.
of ESQ‑based pre‑compliance testing. Due to the significant
investment in equipment, facilities and people that TRaC has
made over the last eight years, TRaC’s service offering is
becoming increasingly attractive for UK‑located companies
developing new products and services.
Business review
mandated by the relevant regulators whilst other test regimes
are mandated by large prime contractors such as Boeing or
Airbus. Many of the test regimes required in the aerospace
sector are highly complex requiring modern, sophisticated
equipment as well as highly skilled technicians or engineers.
TRaC has a strategy of proactively investing in such specialist
test equipment in order to help differentiate its service offering
from the smaller, more traditional ‘test houses’ which find
it increasingly hard to satisfy the exacting demands of the
aerospace sector. Moreover, TRaC finds that by investing in such
test equipment it is often able to secure all of a particular client’s
test work. One example of a specialist aerospace testing
requirement is HIRF (High Intensity Radiated Fields). Over the
last two years TRaC has invested to be able to provide HIRF
testing from its Three‑Legged Cross facility in Dorset. TRaC’s
experience is that its aerospace clients are prepared to pay
a premium for such highly specialist testing.
12
Bioquell PLC
RISKS AND UNCERTAINTIES
RISKS AND UNCERTAINTIES
The Group faces a broad number of risks and uncertainties associated with its activities. It has put in place formal risk‑review structures
and mechanisms to help assess and monitor such risks and uncertainties; and, as appropriate, has taken steps to mitigate the identified
risks and/or uncertainties to the extent practicable. However, it is not possible to identify or anticipate all known, or unknown, risks and
uncertainties; nor is it possible to mitigate all such identified risks and uncertainties.
Set out below is a summary of the principal risks and uncertainties which your Board believes the Group faces, over and above those
which are inherent with carrying out commercial activities. The description of these principal risks and uncertainties should be read in
conjunction with, and considered taking into account of, the description of the activities of the Group set out elsewhere in this document
and on the Group’s websites.
A summary of how the Group seeks to mitigate some or all of these principal risks and uncertainties is also set out in the table below.
Given the nature of these risks and uncertainties – as well as the general nature of risk implicit in any commercial activities – investors
should be aware that there can be no assurances that the mitigation of such risks summarised below will be effective, in whole or in part.
RISK AND/OR UNCERTAINTY
MITIGATION
Regulatory. The Group operates in a number of countries
and sectors which are highly regulated. There is a risk that
the relevant regulations, or their interpretation, could be
changed and such changes could significantly adversely
affect the Group’s business in that country or sector.
Further, given the specialist nature of its activities there
is a risk of jurisdictional dispute by the different regulators
in a territory, as it may not always be clear which regulator
has, or should have, locus over the Group’s activities.
The Group endeavours to work closely and establish
a dialogue, either directly or through its third party
distribution partners and/or clients, with the relevant
regulators in the territories in which it operates. In addition
the Group may, from time to time, engage consultants or
legal advisers to help with its discussions with, or strategic
approach to, the regulators.
Political. The regulatory risks and uncertainties summarised
above can be closely linked to prevailing policies or strategies
being pursued by politicians or civil servants. These policies or
strategies can be affected by effective lobbying, including the
lobbying by the Group’s competitors or customers, which
could adversely affect the Group.
Generally the Group adopts a cautious, low-profile and
conservative approach with its activities, particularly with
those where there may be a political dimension. In some
territories the Group is starting to develop relationships,
either directly or indirectly, with politicians and civil servants
to assist with its dialogue with governments.
Rapid, international growth. The Group is experiencing
rapid growth in a number of the overseas markets in
which it sells products or services. There are a number
of particular risks and management challenges associated
with such rapid growth in overseas territories, including the
preservation of high levels of customer service and support,
and cash collection and repatriation.
In many overseas territories the Group uses third party
distributors to sell and support its products which helps
reduce its direct exposure to the territory – and hence helps
reduce risk. The financial standing and credit limits of these
distributors are, to the extent practicable, closely monitored.
In overseas territories where the Group has a wholly owned
subsidiary and/or employees, the Group uses a standardised
approach to establish and monitor the trading activities, cash
balances and delegated management authorities of these
overseas subsidiaries.
Competition. Some of the Group’s competitors are
substantially larger than the Group and have, among
other things, greater financial, selling and political-lobbying
resources. Accordingly there is a risk that the Group’s business
could be adversely affected by actions undertaken by these
large competitors. Further, although Bioquell has a number
of granted or pending patents internationally, which should
help to protect the key components of its intellectual property
from copying, there is a risk that competitors operating from
territories with poorly enforced, or enforceable, patent law/
patent protection could copy, in part or in whole, Bioquell’s
products or services. In addition, in certain markets in which the
Group operates there is always a risk that ‘doing nothing’ is the
preferred course of action taken by prospective customers –
and apathy or continuing with the status quo represents a form
of competitive risk for some of the Group’s products or services.
The Group monitors the activities of existing, new and
potential competitors closely and is constantly reviewing
and, as appropriate, refining its strategies, business models,
execution plans and new product development depending
on, among other things, competitor activities.
The Group also has a significant portfolio of pending and
granted patents and other intellectual property which is
available to it to invoke, as appropriate.
The Group has also developed specialist manufacturing skills
which should help protect its market share and prospects.
The Group has detailed marketing plans which are designed
to, among other things, increase awareness of the Group’s
products and services – and make it harder for prospective
clients to opt to do nothing.
13
Bioquell PLC
Uncertain adoption rates of new products. The Group
is developing a number of new products and at the same
time changing its business model from one which is
significantly reliant on capital expenditure (by customers) to
one which generates a significant proportion of its revenues
from secondary revenues, including consumable cartridges,
rental and service. Such product development and business
model migration is expensive, requires resources and
contains inherent uncertainty and risk. For example, there
is inherent uncertainty as to how quickly new products
will be adopted by the market – and hence concomitant
uncertainty with revenue, profit and cash generation. Note
that this uncertainty and risk relates to both slow and rapid
adoption rates. Accordingly the Group needs to balance
carefully the amount it invests in new product development
whilst ensuring it retains appropriate profitability and cash
balances (or access to other sources of finance). Moreover,
it can take time to increase or decrease new product
development expenditure and associated resources.
The Group undertakes extensive ‘Voice of the Customer’
market research and seeks to develop new products (and
services) closely with existing or potential customers. The
close involvement of customers helps increase the Group’s
confidence that such new products will be well received
by the market and also provides a good basis for forecast
adoption rates (and revenues). However, in reality actual
adoption rates can only ever be established after a
product launch.
Business model. The Group is taking active steps to reduce
its reliance on equipment sales and to build its revenues
from consumables, rental and other usage-based revenues.
Some of these business models assume a high retention rate
and/or high follow-on revenues; and some require significant
investment of cash up front. There is a risk that the Group’s
assumptions about customer retention are incorrect which
could result in adverse movements in profit and cash.
The Group has clear policies and carefully designed systems
for monitoring usage rates and customer satisfaction metrics,
particularly for new customers in order to mitigate the risk
of customer churn/low retention rates. The Group also
monitors its cash balances and sources of debt finance
carefully. Together these systems have been designed
to help mitigate these risks.
Financial. The Group has a number of international subsidiaries
and trades with companies located throughout the world. The
international nature of many of its business activities result in
elevated financial risk, including, but not limited to: foreign
exchange exposure, credit risk and cash collection/retention/
management (together “Key Financial Risks”).
The Group has standardised, detailed monthly management
reporting packs which all of its subsidiaries are required to
complete. These submissions are reviewed centrally and
the key points discussed at regular subsidiary or divisional
management meetings. As appropriate, foreign exchange
hedging is undertaken centrally. In addition, there are detailed
delegated management authority levels which cover, among
other things, Key Financial Risks.
Legal liabilities. Given its international activities, the
Group could be subject to litigation in a number of different
jurisdictions. By its very nature, such litigation could be
related to a broad number of issues, including alleged patent
infringement, problems relating to the Group’s technology
or contravention of anti-bribery legislation.
Generally the Group adopts a cautious, low-profile and
conservative approach with its activities. It has put in place
a number of policies which employees are required to follow
in order to reduce to the extent practicable these risks.
Further the Group actively seeks to build a close relationship
with its customers in order to resolve, as appropriate, any
issues without the need for litigation.
The Group helps mitigate, in part, the financial uncertainty
with new product launches by ensuring that it retains large
cash balances and access to debt finance so that it is able to
mitigate the effect of unexpected high or low adoption rates.
The Group provides focussed products and services within
its markets and accordingly is able to monitor relevant
technological developments carefully – whether by
competitors or third party research organisations, including
universities. The Group takes into account such technological
developments when reviewing and adjusting its strategy.
It also uses a structured approach to new technology and
new product development which helps the Group manage
the associated risks and monitor progress.
Technological. The Group is dependent on its technology
– and products and services - continuing to be efficacious,
cost effective and attractive to the marketplace. There is
the risk that new technologies, products or services are
developed by competitors which perform better, are easier
to use or are more cost effective than those of the Group.
Further, there is a risk that it takes longer, or costs more
money, than anticipated to complete the development
of new technologies and/or new products.
Business review
MITIGATION
Overview
14
Bioquell PLC
RISKS AND UNCERTAINTIES continued
MITIGATION
Reliance on suppliers. Due to the complexity of many
of its manufactured products, the Group is dependent on
a number of key suppliers. These suppliers could supply
components late, supply poor quality components, refuse
to supply or cease trading. Such disruptions to the Group’s
supply chain could cause major issues to the trading
activities of the Group.
The Group seeks to work closely and in partnership with its key
suppliers. It also has a key supplier review/audit programme
which helps the Group make strategic decisions about working
more closely with a given supplier or, if appropriate, taking the
decision to identify an alternative supplier.
Reliance on customers within a given sector. Although
the Group is not significantly dependent upon one single
customer, changes within a sector or sub-sector could
adversely affect the trading performance of the Group.
For example, the pharmaceutical industry is currently
facing significant challenges as a number of drugs lose
patent protection or from the trend towards the marketing
of disposable, single-use drug delivery systems, and
accordingly there is a risk that such changes could affect
the revenues that the Group generates from companies
within this sector.
The Group monitors carefully the revenue it generates from
any single customer (or customer group) and if appropriate
takes proactive steps to reduce the proportion of such
revenues within the subsidiary or division – or seeks to sell
other product lines to such customers in order to diversify
this risk.
Retention of key employees. The Group has a number
of key employees working for it. The loss of certain of
these employees could be problematic for the Group.
The Group has in place a number of measures which are
designed to optimise key employee retention including,
but not limited to: ensuring that their work is stimulating,
interesting and ‘empowered’; the remuneration is
competitive; the work place environment and culture is
attractive; the opportunity, as appropriate, to participate
in equity upside from employee share option schemes;
and annual appraisals.
15
Bioquell PLC
Page Header
directors
and advisers
Simon Constantine, ACA*
Non-Executive Director
Joined the Board in November 1999. Previously he held a number
of financial and operational positions at Board level within Life
Sciences International PLC. He is also Chairman of Capstone
Foster Care Ltd and Reinnervate Ltd.
Mark Bodeker, CA
Chief Operating Officer & Chief Financial Officer
Joined the Board in April 2000, qualified with and subsequently
worked for Deloitte Haskins and Sells for five years before moving
to TI Group, holding a number of financial positions. Latterly he was
Divisional Finance Director of Meggitt Aerospace Components.
Sir Ian Carruthers*
Joined the Board in August 2010. He is Chief Executive of the
NHS South of England and has extensive experience of the
UK and international healthcare systems.
*Member of the Audit, Remuneration
and Nominations Committees.
Secretary
Georgina Pope, ACMA
Registered Office
52 Royce Close
West Portway
Andover
Hampshire SP10 3TS
Auditors
Deloitte LLP
Chartered Accountants
Reading
Stockbrokers
Investec Limited
Bankers
Royal Bank of Scotland PLC
Registrars
Capita IRG Plc
Christopher Mills**
Joined the Board in December 2012. He is Chief Executive
and Investment Manager of North Atlantic Smaller Companies
Investment Trust PLC, a director of Oryx International Growth
Fund Ltd and is the Chief Investment Officer and a member
of Harwood Capital LLP.
**Member of Remuneration Committee.
Nicholas Adams
Chief Executive
Joined the Board in May 1997 and was appointed Chief Executive
in May 1998. Previously he was a Director of Corporate Finance
at Barings, an investment bank, having spent nine years in Barings’
Corporate Finance Department both in the UK and continental
Europe. He read chemistry at Durham University.
Business review
Tony Bourne*
Joined the Board in March 2009. He is Chief Executive of the
British Medical Association. Previously he held senior positions
at the investment banks Paribas and Merrill Lynch.
Overview
Nigel Keen, FCA, FIET*
Chairman
Joined the Board in March 2008 and was appointed Chairman in
2009. He gained a degree in Engineering from Cambridge University
and also qualified as an accountant with Deloitte. He has pursued a
career encompassing industry, venture capital and banking. In 1984
Nigel Keen founded the Cygnus group of venture capital investment
companies. He is Chairman of Laird PLC, Oxford Instruments Plc and
Deltex Medical Group Plc.
16
Bioquell PLC
Page Header
directors’
report
The Directors present their annual report and the audited financial statements for the year ended 31 December 2012.
The Corporate Governance Statements set out on pages 19 to 20 forms part of this report.
Principal activity
The Company is a holding Company with operating subsidiaries located in the United Kingdom and sales and service
offices in France, Ireland, Singapore, the Peoples Republic of China and the United States.
The principal activities of the Group include the design, manufacture and supply of bio‑decontamination and containment
equipment, related products and services to the healthcare, life sciences and defence industries, and testing, regulatory
and compliance services to a broad range of customers including those in the aerospace, telecoms and defence industries.
Business review
The results for the year are set out in the income statement on page 28. A review of the Group’s business and future
prospects is summarised in the Chairman’s statement and Business review.
Risks and uncertainties
Set out on pages 12 to 14 is a summary of the principal risks and uncertainties which your Board believes the Group faces, over and
above those which are inherent with carrying out commercial activities. The description of these principal risks and uncertainties should
be read in conjunction with, and considered taking into account of, the description of the activities of the Group set out elsewhere in
this document and on the Group’s websites.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the Business Review on pages 6 to 11 and the risks and uncertainties which affect the business are
summarised on pages 12 to 14. The Group has sufficient financial resources to cover budgeted future cash‑flows, together
with contracts with its customers and suppliers across different geographic areas and industries. The Directors believe that
the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
In accordance with the Corporate Governance requirements and the Statement of Directors’ responsibilities on page 25,
the Directors confirm that they have a reasonable expectation that the Group has adequate finance resources to continue to
trade for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements.
Directors and Directors’ interests
The Directors of the Company are shown on page 15. All of them served throughout the year and through to the signing
of the financial statements with the exception of Christopher Mills who joined the Board on 18 December 2012. The
interests of the Directors in ordinary shares and options to acquire ordinary shares in the Company are shown in the table
below and the tables in the Directors’ Remuneration Report.
The Directors who held office at 31 December 2012 had the following interests in the ordinary shares of the Company:
Beneficial holdings include holding of spouses and infant children
Christopher Mills*
Nicholas Adams
Simon Constantine
Nigel Keen
Mark Bodeker
31 December 2011
Percentage
of share capital
1 January 2011
9,232,471
830,000
470,000
92,270
86,761
22.1%
2.0%
1.1%
0.2%
0.2%
—
830,000
470,000
92,270
86,761
10,711,502
1,479,031
*Mr Mills is Chief Investment Officer and a member of Harwood Capital LLP which owns 22.1% of the share capital.
Details of the Directors’ share options are provided in the Directors’ Remuneration Report on page 21.
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association,
the Combined Code, the Companies Acts and related legislation. The Articles themselves may be amended by special
resolution of the shareholders.
Nigel Keen and Simon Constantine retire by rotation at the next Annual General Meeting and, being eligible, offer
themselves for re‑election. Christopher Mills who was appointed a director on 18 December 2012 retires at the next
Annual General Meeting and, being eligible, offers himself for re‑election. Biographical information on all directors
can be found on page 15.
17
Bioquell PLC
Page Header
Overview
Supplier payment policy
The Group’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction. Trade
creditors of the Group at 31 December 2012 were equivalent to 60 days’ (2011: 57 days’) purchases, based on the average
daily amount invoiced by suppliers during the year.
Research and development expenditure
The Group’s policy is to develop new and improve existing products and services to meet the needs of its customers. The
amount charged to the income statement in the year on research and development under IFRS amounted to £1,297,000
(2011: £1,197,000) – the total expenditure was £3,938,000 (2011: £2,315,000).
9,232,471
6,161,282
5,845,471
2,207,175
2,046,477
1,998,167
22.1%
14.7%
13.9%
5.3%
5.0%
4.8%
Ordinary shareholders
Harwood Capital LLP*
M&G Investment Management Limited*
Prudential Group of companies*
A.H.J. Muir
J. G. Salkeld
Henderson Global Investors
*The registered owners of shares in which these holders have an interest may be subsidiaries and associated companies and/or pension funds, unit trusts
or investment trusts under that holder’s management.
During the period between 31 December 2012 and 19 March 2013 the company received a notification under chapter 5
of the Disclosure and Transparency Rules from Henderson Global Investors stating that their holding had increased to
2,188,167 shares (5.2% of ordinary share capital).
Capital structure
Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share
capital during the year are shown in note 25. The Company has one class of ordinary shares. Each share carries the right
to one vote at general meetings of the Company and carries no right to fixed income.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the
general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements
between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 33. No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
Under its Articles of Association, the Company has authority to issue 2,089,697 ordinary shares.
Dividends
The Board is recommending the payment of a final dividend of 3.06 pence per ordinary share to be paid on 1 July 2013
to ordinary shareholders on the register on 7 June 2013, representing a total payment of £1,279,000 (2011: £1,182,000).
Number
Percentage
of issued
ordinary share
capital
Business review
Substantial shareholdings
On 31 December 2012 the company had been notified, in accordance with chapter 5 of the Disclosure and Transparency
Rules, of the following voting rights as a shareholder of the company.
18
Bioquell PLC
Page Header
directors’
report continued
Capital risk management
The Group manages its capital to ensure that entities in the Group have sufficient funding to continue as a going concern
while also retaining sufficient funding to enable the Group to invest in its development. The capital structure of the Group
consists of debt, which includes borrowings disclosed in note 19, cash and cash equivalents and equity attributable to
equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 25 to 30.
Equal opportunities
The Group aims to ensure there are equal opportunities for all employees with no discrimination on accounts of race, age,
gender, sexual orientation, disability and political or religious beliefs.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with
the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career
development and promotion of disabled persons should as far as possible, be identical to that of other employees.
Employee communication
The Group places considerable value on the involvement of its employees and has continued to keep them informed on
matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved
through formal and informal meetings and other forms of communication.
Disclosure of information to the auditors
Each of the persons who is a Director at the date of approval of this report confirms that:
(1) so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
(2)the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any
relevant audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with provisions of s418 of the Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them will
be proposed at the forthcoming Annual General Meeting.
Approved by the Board of Directors, and signed on behalf of the Board.
Georgina Pope
Secretary
19 March 2013
19
Bioquell PLC
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corporate
governance
Compliance with the UK Corporate Governance Code
The Company is committed to the principles of corporate governance contained in the Code. The Board is accountable
to shareholders for applying these principles.
Business review
Nigel Keen
Chairman
Overview
Introduction by the Chairman
The Board is committed to upholding the highest standards on corporate governance, protecting and growing our
shareholders’ assets, and engaging in a fair and transparent manner with all of our stakeholders. We take responsibility
for approving the Group’s long term goals and strategies, and provide overall financial and organisational control. We also
have put in place appropriate internal control and risk management systems across the Group. The detailed statement
below sets out how the Company has applied the main and supporting principles of good governance set out in the
UK Corporate Governance Code issued in June 2010 by the Financial Reporting Council (“the Code”).
The Directors consider that throughout the year ended 31 December 2012 the Company has been in compliance with the
code provisions set out in the Code, except for code provision A.4.1 as the Board has not nominated a senior independent
Director other than the Chairman, because the Board is small; and code provision D.2.1 as Nigel Keen is Chairman of the
Remuneration Committee and also Chairman of the Company.
The Chairman
Nigel Keen is Chairman of the Nomination and Remuneration Committees as the Board considers that for a SmallCap company the
Chairman’s prime roles are: to procure an excellent strategy for the business; to recruit and retain the best available management
team to execute this strategy; to put in place a Board of independent directors whose experience can add value to the work of the
management; and to ensure that the business maintains the highest standard of corporate governance. Taking into consideration
the size of the Company, the Board believes that in order to fulfil these obligations it is appropriate and necessary for the Chairman
of the Board to also be Chairman of the Nomination Committee and the Remuneration Committee.
The Board
The Board comprises two executive and five Non-Executive Directors who possess the appropriate balance of skills, experience,
independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.
The Non-Executive Directors, including Christopher Mills, are considered by the Board to be independent in character and
judgement. However Christopher Mills is not judged to be independent under the criteria set out in the Code as a result of his
being Chief Investment Officer of Harwood Capital, the Company’s largest shareholder. The Board does not consider the fact
that the other Non-Executive Directors hold shares in the Company impairs their independence. Mr Mills joined the Board as an
additional Non-Executive Director and therefore the position was not advertised. In the case of Simon Constantine, who has
served on the Board for more than nine years, the Board is satisfied that he remains free from any relationship with the executive
management of the Company which could interfere with the exercise of his independent judgement and that he continues to
provide a rigorous challenge to management; he is proposed for re-election in accordance with the Code.
The Non‑Executive Directors are required to submit themselves for re‑election at regular intervals. Before re‑election the
Chairman will confirm to the shareholders that the individual’s performance continues to be effective and the individual
continues to demonstrate their commitment to the role. This composition satisfies the Code’s Principles and Provisions
that the Board should have a balance of executive and Non‑Executive Directors in terms of number and relevant experience
to enable it to have effective leadership and control of the Company and its subsidiaries. The Directors have access to all
information and, if required, independent professional advice at the expense of the Company. The Board normally convenes
monthly with attendance by all Directors. Sir Ian Carruthers and Tony Bourne were each absent from one of the twelve
meetings held during the year, all other directors were present for all the meetings held during the year. Christopher Mills
did not join the Board until 18 December 2012 and therefore was not present at any Board meeting during 2012.
The Board has formally adopted a schedule of matters which are specifically reserved for its decision and retains full
control over key strategic, financial and organisational issues within the Group. The Board has agreed a written statement
which sets out the division of responsibilities between the Chairman and the Chief Executive. The Board has established
Audit, Remuneration and Nominations Committees.
For the year ended 31 December 2012 the Board has completed its annual effectiveness evaluation exercise. This was an
internal exercise under the control of the Chairman using a detailed questionnaire completed by all Directors in relation
to the key areas of Board accountability and the arrangements in place to enable effective focus on these areas. Each
Director has discussed the results of this review with the Chairman at the individual one‑to‑one interviews which the Chairman
holds with the directors. The Chief Executive is also involved in the process by giving his input on the way the Board helps
him in his role. The output from these evaluations allows the Chairman to review objectively the overall balance of the Board.
20
Bioquell PLC
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corporate
governance continued
The Audit Committee
The Audit Committee consisted of the four independent Non‑Executive Directors including the Chairman of the Company
and met three times during the year with all members present at each meeting. The Chairman of the Committee is Simon
Constantine. This Committee oversees the proper observation of accounting standards, the application of the Group’s
accounting policies, its systems of internal financial controls and all issues relating to the preparation and approval of the
Group’s annual and half‑yearly Reports and Accounts. The Committee also considers the effectiveness of the audit
process, objectivity and independence of the Group’s auditors by a process of assessment and keeps the scope of
non‑audit service provided by the auditors and the level of non‑audit fees under review. In addition it is involved in the
approval of the audit fees and the auditors’ terms of engagement. The Audit Committee acknowledges its responsibility
to investigate any reports of impropriety or potential fraud.
The Board has considered the need to introduce an independent Group internal audit function but has decided that the
current control mechanisms incorporating the Finance and Quality teams are appropriate in the context of the size and
complexity of the business. The Board reviews this position at least annually.
The Remuneration Committee
The Remuneration Committee consisted of four Non‑Executive Directors and was chaired by Nigel Keen – Christopher
Mils joined the committee on 18 December and therefore did not attend any of the meetings. The Committee, which met
once during the year, is responsible for recommending to the Board the terms of service and remuneration of the
Executive Directors. It also has oversight of the remuneration levels of the senior members of the management teams.
The Committee is responsible for the allocation of share options throughout the Group. The Report of the Remuneration
Committee is included on pages 21 to 24.
The Board as a whole, determines the remuneration of the Chairman and the terms of his appointment and the
remuneration of the other Non‑Executive Directors. No Director is involved in deciding his own remuneration.
The Nominations Committee
The Nominations Committee consisted of the four independent Non‑Executive Directors and is chaired by Nigel Keen
and met once during 2012. This Committee is responsible for nominating candidates for appointment to the Board having
regard to the overall skills balance and composition of the Board. It also recommends to the Board the composition of the
Board committees.
Risk Management and Internal Control
A risk management policy is in place which sets out the Board’s overall approach to management and acceptance of risk.
The Directors and senior managers of each Group business are required to undertake their own risk identification and
assessment according to the individual circumstances of the business which they manage, and this risk assessment is then
reviewed and evaluated by the Group Finance Director and submitted to the Board for consideration. This system has
been in place since 1 January 2012 and up to the date of approval of the Report and Accounts. This risk management
process is regularly reviewed by the Board and accords with “Internal Control: Guidance for Directors on the Combined
Code” produced by the Turnbull working party.
The Directors have overall responsibility for the system of internal control throughout the Group and for reviewing its
effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives,
as it can only provide reasonable, but not absolute, assurance against material misstatement or loss. The Board has conducted
a review of the effectiveness of the system of internal control for the year ended 31 December 2012 and the period up to
19 March 2013. In carrying out this review the Board takes account of material developments through reports by the Chief
Executive, the Group Finance Director and the Audit Committee. No significant issues were found during this review.
The Board has established an organisation structure with clear lines of accountability. Formalised processes are in place
for the preparation, review and approval of business plans, budgets and investment proposals for the Group as a whole
and for the individual divisions. Financial results and other key business monitors are reported to the Board regularly and
variances from approved budgets identified and used to initiate action. The Board has published, internally, management
rules which include financial and operating control procedures with which the management of each subsidiary or division
is required to comply.
Directors’ Conflicts of Interest
All directors have a duty, under the Companies Act 2006 (“the Act”) to avoid a situation in which a direct or indirect
interest conflicts or possibly may conflict with the interests of the Company. The Company’s Articles of Association include
provisions for dealing with Directors’ conflicts of interest in accordance with the Act.
Communication with Shareholders
The Board attaches a high priority to communications with shareholders. The Group’s annual and half‑yearly Reports and
Accounts are sent to all shareholders. The Group meets regularly with its shareholders and there is an opportunity for
shareholders to question the Chairman and the Directors at the Annual General Meeting.
Bioquell PLC
21
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directors’
remuneration report
Overview
Introduction
This report has been prepared in accordance with Schedule 8 to the Accounting Regulations under the Companies Act 2006.
The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes
how the Board has applied the Principles of the UK Corporate Governance Code relating to Directors’ remuneration.
As required by the Act, a resolution to approve the report will be proposed at the Annual General Meeting at which the
financial statements will be approved.
In accordance with the Directors’ Remuneration Report Regulations the five tables setting out the Executive and
Non‑Executive Directors’ remuneration, pensions and share options contained within the report have been audited;
all other information including the statements of policy have not been audited.
Business review
Remuneration Committee
The Company has established a Remuneration Committee, which consists of the five Non‑Executive Directors: Nigel Keen
(Chairman), Tony Bourne, Sir Ian Carruthers, Simon Constantine and Christopher Mills. Nigel Keen is also Chairman of the
Company and as has been described above in the Corporate Governance Report, the Board considers that it is appropriate that
he is also Chairman of the Remuneration Committee. The Committee defines the Company’s policy on remuneration, benefits
and terms of employment. As part of this process, it provides a formal framework for the development of remuneration policy
for Executive Directors and for fixing the remuneration packages of individual Directors. The Board, as a whole, is responsible
for fixing the remuneration of the Non‑Executive Directors, including the Chairman.
No Director is involved in deciding his own remuneration.
Over the past year the Committee had access to independent, external advisers when required and the Committee sought
input from the Chief Executive. The Chairman maintains contact with principal shareholders regarding remuneration policy.
The terms of reference of the Remuneration Committee are available at www.bioquellplc.com.
Remuneration policy
The Remuneration Committee has established a policy on the remuneration of Executive Directors and the Board has
established a policy for the remuneration of the Chairman and the Non‑Executive Directors.
Non‑Executive Directors
The Company’s policy is to appoint Non‑Executive Directors to the Board with a breadth of international skills
and experience that is relevant to the Group’s global business. Appointments are made by the Board upon the
recommendation and advice from the Nominations Committee.
Service contracts
The Executive Directors have service contracts with an indefinite term with notice periods of 12 months in respect of
Nicholas Adams and six months in respect of Mark Bodeker. The contract date for Nicholas Adams and Mark Bodeker is
16 April 2000. In the event of a change of control of the Company, the notice periods of Nicholas Adams and Mark Bodeker
are extended to two years, and a change of control may be treated by the individual as a terminating event. In the event of
early termination, the Directors’ contracts provide for compensation up to a maximum of base salary for the notice period.
The Remuneration Committee considers these notice periods to be reasonable and proper and in the interests of both the
Company and the Directors, having regard to market conditions and current practice. The Remuneration Committee’s
policy on early termination is to provide compensation which reflects the Company’s contractual obligations, whilst
recognising the principle of mitigation of losses.
The Non‑Executive Directors have specific terms of engagement as detailed below and their remuneration is determined
by the Board within the limits set by the Articles of Association. The Non‑Executive Directors receive no further fees for
additional work performed for the Company in respect of membership of either the Remuneration Committee, the Audit
Committee or the Nomination Committee.
The terms of engagement of the Directors are available for inspection at the Annual General Meeting.
Executive Directors
The Company has in place an incentive‑driven Executive Director remuneration programme that promotes the delivery of the
Group strategy, seeks to align the interest of Directors and shareholders and reflects the performance of each Director. Overall
the remuneration package aims to be appropriate to attract, motivate and retain high calibre executives. The Remuneration
Committee considers carefully the motivational effects of the incentive structure in order to ensure that it is effective and does
not have any unintentionally negative impact on matters such as governance, the risk profile of the Group and environmental
and social issues. A significant proportion of total potential rewards are provided through performance‑based schemes.
The Committee also reviews and approves general increases in salaries and bonus arrangements for staff. The remuneration
policy and practice for employees are taken into account when setting remuneration for Executive Directors.
22
Bioquell PLC
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directors’
remuneration report continued
Executive Directors’ remuneration
Executive Directors receive base salary, annual performance awards, pension contributions and other benefits and long
term performance awards. These remuneration programmes for the Executive Directors are reviewed annually by the
Remuneration Committee and are determined with reference to an appropriate comparator group of companies.
Consideration is given to the Director’s experience, performance and responsibilities. Benefits comprise provision
of a car or car allowance and life and health insurance.
Emoluments of the current Executive Directors showing the breakdown between basic and performance related
remuneration are:
Nicholas Adams
Mark Bodeker
Fees/basic
salary
£’000
Benefits
in kind
£’000
282
243
11
8
525
19
Performance
related bonuses*
£’000
2012
£’000
2011
£’000
46
23
339
274
450
309
69
613
759
*Bonuses are paid after the completion of the statutory annual audit.
Annual performance incentive bonus
The Executive Directors’ bonus scheme for the year ended 31 December 2012 set performance targets which would pay
bonuses at a maximum of 100% of salary. Bonuses were earned on full year performance. The level of award for the year
ended 31 December 2012 took account of achievement against specific targets in relation to profit, turnover, cash
generation and measurable progress in meeting defined strategic objectives for the Group.
For the financial year to 31 December 2013, the structure of the Executive Directors’ bonuses will be similar to that for the
year to 31 December 2012.
Executive Director pension arrangements
Under the terms of their service contracts Nicholas Adams and Mark Bodeker can ask the Company to contribute to
a pension plan of their own choice. The Company contributed a maximum of 12% of base salary up to 31 March 2011
and a maximum of 15% thereafter. Bonus payments are excluded from the contribution calculations. During the year
the Company contributed £43,000 (2011: £39,000) into a pension scheme in respect of Nicholas Adams and £36,000
(2011: £34,000) in respect of Mark Bodeker.
Money purchase pension contributions
2012
£’000
2011
£’000
79
73
2012
£’000
2011
£’000
613
—
79
759
—
73
692
832
Aggregate Executive Directors’ remuneration
The total amounts for Executive Directors’ remuneration were as follows:
Emoluments
Gains on exercise of share options
Money purchase pension contributions
23
Bioquell PLC
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hh
the Executive Share Option Scheme (ESO); and
Overview
Share incentive schemes
The Company has the following share options schemes for incentivising Executive Directors and employees of the Group:
hh
the Save‑As‑You‑Earn scheme (SAYE).
The ESO scheme is the primary vehicle used to incentivise the Executive Directors and senior management.
Options are granted at the market value on the date of grant and are exercisable after three years but not more than
ten years (unapproved options: seven years) from the date of grant.
Performance conditions
The Remuneration Committee considers that having performance conditions in place that require growth in earnings
per share (EPS) above a specified level will encourage shareholder value creation and improved financial performance.
In selecting appropriate targets the Committee takes into account both the recent performance of the Company and
its projections for future growth. For option awards granted in 2012 the performance condition required for the options
to vest was that the Group’s EPS should increase at a rate of 7.5% per annum over the three year period of the option.
There is no retesting of performance if the performance condition is not met.
At 31 December 2012 the outstanding options for the Directors under the ESO scheme were as follows:
Nicholas Adams
221,000
169,355
257,000
—
—
—
—
225,000
(221,000)
—
—
—
—
169,355
257,000
225,000
Mark Bodeker
194,500
149,032
226,000
—
—
—
—
198,000
(194,500)
—
—
—
—
149,032
226,000
198,000
1,216,887 423,000
Lapsed
Expiry date
113.0
155.0
104.0
122.5
26.03.12
17.03.13
23.03.14
29.03.15
26.03.16
17.03.17
23.03.18
29.03.19
113.0
155.0
104.0
122.5
26.03.12
17.03.13
23.03.14
29.03.15
26.03.16
17.03.17
23.03.18
29.03.19
(415,500) 1,224,387
There have been no variations to the terms and conditions or performance criteria for share options during the year. Share
options granted to Nicholas Adams (221,000 in 2009) and Mark Bodeker (194,500 in 2009) lapsed during the year as the
performance criteria for exercise was not met.
The market price of the ordinary shares at 31 December 2012 was 154.0 pence (2011: 108.0 pence) and the range during the
year was 108.0 pence to 154.0 pence.
Chairman
Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the
Company and he must account to Imperialise Limited for his services. His current term of appointment commenced on
10 March 2011 and is for three years. In addition Imperialise Limited is paid a sum equivalent to the employer’s national
insurance contributions on these fees as it is responsible for the cost of national insurance on payments to Nigel Keen,
whereas national insurance contributions in respect of Tony Bourne and Simon Constantine are made directly to HMRC.
Nigel Keen’s appointment can be terminated by the Company on six months’ notice.
Granted/
(exercised)
Name of Director
Date
from which
exercisable
31 December Exercise
2012 price (p)
1 January
2012
Share appreciation rights
Share options that are unapproved can be exercised using the share appreciation rights (‘SAR’) system. Under SAR,
in effect, an option is settled by issuing shares to the value of the gain on the share option up to the time of exercise
at nil consideration. This means that the number of shares to which an option holder may become entitled depends
on the Company’s share price at the time of exercise.
Business review
ESO Scheme
This shareholder and HMRC approved scheme grants options over new shares to be issued at the time of exercise.
Options granted to an individual in excess £30,000 are classified as unapproved. The aggregate market value of shares
over which options under the ESO scheme may be granted to an individual participant in any 12 month period may not
normally exceed 1.5 times base salary.
24
Bioquell PLC
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directors’
remuneration report continued
Independent Non‑Executive Directors
Non‑Executive Directors are appointed for an initial period of three years with subsequent reviews. They do not have
a contract of employment and their appointment can be terminated without notice. It is the Board’s policy for the
Non‑Executive Directors to be paid a level of fee that reflects the time commitment and responsibilities of the role and
is sufficient to attract individuals with appropriate knowledge and experience. Non‑Executive Directors receive fixed
fees agreed by the full Board after reference to similar roles in an appropriate comparator group of companies and
reimbursement of expenses incurred in attending Board and other meetings. The fees and expenses paid in relation
to the appointment of Sir Ian Carruthers are paid to the South West Strategic Health Authority.
Remuneration of the Chairman and Non‑Executive Directors:
Nigel Keen
Tony Bourne
Sir Ian Carruthers
Simon Constantine
Total
2012
£’000
2011
£’000
63
30
30
30
62
30
30
30
153
152
Performance graph
The following graph shows the Company’s performance, measured by TSR, compared with the performance of the FTSE
All‑share Index also measured by TSR. The FTSE All‑share Index is considered the most appropriate benchmark against which
to measure Group performance. The graph is prepared on the basis of constituent companies in the Index at a point in time.
5 Year Index of BIOQUELL share price relative to FTSE All-share Index
300
250
Index
200
BQE
150
FTSE All-share
100
50
Oct–12
Jul–12
Apr–12
Jan–12
Oct–11
Jul–11
Apr–11
Jan–11
Oct–10
Jul–10
Apr–10
Jan–10
Oct–09
Jul–09
Apr–09
Jan–09
Oct–08
Jul–08
Apr–08
Jan–08
0
This report was approved by the Remuneration Committee at a meeting on 19 March 2013 and has been approved
subsequently by the Board of Directors, and signed on behalf of the Board.
Nigel Keen
Chairman of the Remuneration Committee
19 March 2013
Bioquell PLC
25
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statement
of directors’ responsibilities
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are
required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company
financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they
are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company
for that period.
Overview
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
law and regulations.
In preparing the parent company financial statements, the directors are required to:
hh
make judgements and accounting estimates that are reasonable and prudent;
hh
state whether applicable UK Accounting Standards have been followed; and
hh
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
Business review
hh
select suitable accounting policies and then apply them consistently;
In preparing the group financial statements, International Accounting Standard 1 requires that directors:
hh
properly select and apply accounting policies;
hh
provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance; and
hh
make an assessment of the company’s ability to continue as a going concern.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
hh
the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the
consolidation taken as a whole; and
hh
the management report, which is incorporated into the directors’ report, includes a fair review of the development and
performance of the business and the position of the company and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Nicholas AdamsMark Bodeker
Chief Executive Officer
Chief Financial Officer
19 March 2013
19 March 2013
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
hh
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
26
Bioquell PLC
independent
report
notes to the auditors’
consolidated
financial statements
to
of 31
Bioquell
PLC 2012
forthe
themembers
year ended
December
We have audited the group financial statements of Bioquell PLC for the year ended 31 December 2012 which comprise the
Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent
Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and
the related notes 1 to 34 for the group financial statements and 1 to 14 for the parent company financial statements. The
financial reporting framework that has been applied in the preparation of the group financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications
for our report.
Opinion on financial statements
In our opinion:
hh
the group financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 31 December 2012 and of the group’s profit for the year then ended;
hh
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
hh
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
hh
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and,
as regards the group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
hh
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006;
hh
the information given in the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements.
27
Bioquell PLC
hh
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
Overview
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
hh
the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
hh
certain disclosures of Directors’ remuneration specified by law are not made; or
hh
we have not received all the information and explanations we require for our audit.
hh
the directors’ statement, contained within the directors’ report, in relation to going concern;
Business review
Other matters
Although not required to do so, the Directors have voluntarily chosen to make a corporate governance statement detailing
the extent of their compliance with the UK Corporate Governance Code. We reviewed:
hh
the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review; and certain elements of the report to shareholders by the
Board on directors’ remuneration.
John Clennett (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
19 March 2013
28
Bioquell PLC
consolidated
income statement
notes to the consolidated
financial statements
for the year ended 31 December 2012
Notes
2012
£’000
2011
£’000
4
40,995
41,256
Cost of sales
(21,360)
(22,388)
Gross profit
19,635
18,868
48%
46%
Revenue
Gross profit margin
Operating expenses:
Sales & marketing costs
(7,505)
(6,603)
Administration costs
(5,337)
(5,023)
R&D and engineering costs
(2,595)
(2,220)
Profit from operations
6
4,198
5,022
Investment revenues
8
2
55
Finance costs
9
(247)
(76)
3,953
5,001
Profit before tax
Tax
10
41
(1,136)
Profit for the year
30
3,994
3,865
11
9.6p
9.3p
9.5p
9.2p
2012
£’000
2011
£’000
3,994
3,865
32
1
4,026
3,866
Earnings per share – basic
– diluted
Movements in reserves are set out in notes 25, 26, 27, 28, 29 and 30.
All amounts are derived from continuing operations.
consolidated statement of comprehensive income
Net profit for the year
Exchange differences on translation of foreign operations
Total recognised income
29
Bioquell PLC
consolidated bALANCE SHEET
as at 31 December 2012
Non‑current assets:
Goodwill
Other intangible assets
Property, plant & equipment
Deferred tax assets
691
9,148
13,440
175
23,454
Current assets:
Inventories
Trade and other receivables
Derivative financial instruments
Current tax asset
Cash and cash equivalents
17
18
20
2,752
10,057
—
235
3,010
16,054
42,643
1,283
9,449
180
—
5,179
16,091
39,545
Total assets
Current liabilities:
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Net current assets
Non‑current liabilities:
Deferred tax liabilities
Other non‑current liabilities
Total liabilities
Net assets
Equity:
Share capital
Share premium account
Equity reserve
Capital reserve
Translation reserve
Retained earnings
Equity attributable to equity holders of the Company
22
20
(7,780)
(9)
—
(105)
(76)
8,084
(7,354)
—
(457)
(105)
(93)
8,082
21
24
(2,975)
(968)
(11,913)
30,730
(2,865)
(1,072)
(11,946)
27,599
25
26
27
28
29
30
4,179
210
1,736
255
(76)
24,426
30,730
4,175
168
1,516
255
(108)
21,593
27,599
19
23
The financial statements of Bioquell PLC, registered number 00206372, were approved by the Board of Directors
and authorised for issue on 19 March 2013.
They were signed on its behalf by:
Director
Director
19 March 2013
19 March 2013
691
11,906
13,817
175
26,589
13
14
15
21
Business review
2011
£’000
Overview
2012
£’000
Notes
30
Bioquell PLC
Consolidated
statement of financial
changes in
equity
notes to the consolidated
statements
Profit for the year
Exchange differences
Total comprehensive income in the year
2012
£’000
2011
£’000
3,994
3,865
32
1
4,026
3,866
4
—
Other movements in the year:
Issued share capital
42
3
235
227
6
(16)
Final dividend for year ended 31 December 2011/2010
(1,182)
(1,094)
Net increase in equity shareholders’ funds
3,131
2,986
Issued share premium
Credit to equity reserve for share‑based payments
Movement in deferred tax charged to equity
Equity shareholders’ funds at beginning of year
27,599
24,613
Equity shareholders’ funds at end of year
30,730
27,599
31
Bioquell PLC
Consolidated cash flow statement
2012
£’000
2011
£’000
31
6,015
6,409
Overview
Net cash from operating activities
Note
Investing activities
22
(3,109)
(3,959)
Expenditure on product development
(3,753)
(2,046)
(125)
—
(6,930)
(5,983)
Proceeds on disposal of property, plant and equipment
Purchase of intangible asset
Net cash used in investing activities
Financing activities
3
(1,094)
(104)
(255)
—
(28)
Net cash used in financing activities
(1,240)
(1,374)
Net decrease in cash and cash equivalents
(2,155)
(948)
5,179
6,130
Dividends paid on ordinary shares
Movement in borrowings
Repayment of obligations under finance leases
Bank cash at beginning of year
Effect of foreign exchange rate changes
Bank cash at end of year
(14)
(3)
3,010
5,179
46
(1,182)
Proceeds on issue of ordinary shares
Business review
57
Purchases of property, plant and equipment
32
Bioquell PLC
notes to the consolidated financial statements
1. General
Bioquell PLC (the “Company”) is a Public Limited Company incorporated in the United Kingdom. The address of the
registered office is given on page 15. The nature of the Group’s operations and its principal activities are set out on
page 16. The financial statements are presented in pounds sterling (£) since that is the currency in which the majority
of the Group’s transactions are denominated.
The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has
not had any significant impact on the amounts reported in these financial statements but may impact the accounting for
future transactions and arrangements.
IAS 1 (amended) Presentation of financial statements; the amendment increases the required level of
disclosure within the statement of comprehensive income.
IAS 19Employee benefits; the amendments change the accounting for defined benefit schemes
and termination benefits.
IFRS 7 (amended)Financial instruments: disclosures. The amendments increase the disclosure requirements
for transactions involving the transfer of financial assets in order to provide greater
transparency around risk exposures when financial assets are transferred.
IAS 12 (amended)Income taxes; the amendments provide a practical approach for measuring deferred tax
liabilities and deferred tax assets derived from investment property.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not effective (and in some cases had not yet been adopted by the EU):
IFRS 1 (amended)
Government Loans
IFRS 7 (amended) Disclosures – Offsetting Financial Assets and Liabilities
IFRS 9Financial Instruments
IFRS 10Consolidated Financial Statements
IFRS 10, IFRS 12 & IAS 27
(amended)Investment Entities
IFRS 11
Joint Arrangements
IFRS 12Disclosure of Interests in Other Entities
IFRS 13Fair Value Measurement
IAS 27 (revised)Separate Financial Statements
IAS 28 (revised)Investments in Associates and Joint Ventures
IAS 32 (amended)Offsetting Financial Assets and Financial Liabilities
It is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been
completed, any impact is likely to be disclosure in nature.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The financial statements have also been prepared in accordance with the IFRS adopted by the European Union and
therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis except for the revaluation of certain properties
and financial instruments. The principal accounting policies adopted are set out on the following pages.
Bioquell PLC
33
Overview
2. Significant accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each year. All intra‑group transactions, balances, income and
expenses are eliminated on consolidation.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue
to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the
Business Review on pages 6 to 11 and the Directors’ Report on pages 16 to 18.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable
for goods and services provided in the normal course of business, net of discounts, VAT and other sales‑related taxes.
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
hh
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
hh
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold;
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of
the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately
in profit or loss.
Business review
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit
and loss as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 are recognised at their fair value at the acquisition date.
hh
the amount of revenue can be measured reliably;
hh
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.
The stage of completion of the contract is generally determined by reference to costs incurred as a proportion of contract
costs and revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered
and direct expenses incurred.
Revenue from externally funded research and development is recognised as costs are incurred on a cost plus basis
determined by the terms of the contract.
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.
Profit form operations is stated after charging restructuring costs and after the share of results of associates but before
investment income and finance costs.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using
the straight‑line method, on the following bases:
Property 25 years
Short‑term leasehold improvements
10 to 15 years
Fixtures and equipment
3 to 8 years
Freehold land and property is not depreciated.
hh
it is probable that the economic benefits associated with the transaction will flow to the entity; and
34
Bioquell PLC
notes to the consolidated financial statements continued
2. Significant accounting policies continued
Property, plant and equipment continued
Properties or assets in the course of construction for production, supply or administrative purposes, or for purposes not
yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees. Depreciation
of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets,
or, where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or scrappage of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in income.
Inventories
Inventories are stated at the lower of cost, calculated as standard cost based on latest purchase cost, and net realisable
value. Cost comprises direct materials and, where applicable, direct labour cost and those overheads that have been
incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated
selling price less all estimated costs of completion.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based
on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates except where the Group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The carrying 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 profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Bank borrowings
Interest‑bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual
basis to the profit and loss account using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions
attaching to them and that the grants will be received.
The benefit of a government loan at a below‑market rate of interest is treated as a government grant, measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Government grants towards staff re‑training costs are recognised as income over the periods necessary to match them
with the related costs and are deducted in reporting the related expense.
Government grants relating to property, plant and equipment are treated as deferred income and released to profit or loss
over the expected useful lives of the assets concerned.
Bioquell PLC
35
Overview
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value
of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is tested for impairment
annually and whenever there is an indication that it may be impaired. Any impairment is recognised immediately in profit
or loss and is not subsequently reversed.
Goodwill arising on acquisitions prior to the date of transition to IFRS has been retained at the previous UK GAAP amounts
subject to being tested for impairment at that date.
An internally generated intangible asset arising from the Group’s development activity is recognised only if all of the
following conditions are met:
hh
an asset is created that can be identified (such as products and new processes related to bio‑decontamination solutions);
hh
it is probable that the asset created will generate future economic benefits; and
Business review
Internally generated intangible assets – research & development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
hh
the development cost of the asset can be measured reliably.
Intangible assets – customer relationships
Customer relationship intangible assets, acquired in a business combination are initially measured at fair value, based
on discounted cash flows, and amortised over their estimated useful lives of five years on a straight‑line basis.
Patents and trademarks
Patents and trademarks are measured initially at purchase cost. They are amortised over their estimated useful lives,
which is on average 15 years, although patent protection extends to 20 years.
Recoverable amount is the higher of 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 money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset (or cash‑generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash‑generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic
environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the
results and financial position of each Group company are expressed in pounds sterling, which is the functional currency
of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing at that date. Non‑monetary items carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was determined. Non‑monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Provision
is made for any impairment and immediately expensed in the period.
Internally generated intangible assets are amortised on a straight‑line basis over their useful lives which is deemed to be
15 years. Where no internally‑generated intangible asset can be recognised, development expenditure is expensed in the
period in which it is incurred.
36
Bioquell PLC
Foreign currencies continued
Exchange differences are recognised in profit or loss in the period in which they arise except for:
hh
exchange differences on foreign currency borrowings relating to assets under construction for future productive use,
which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those
foreign currency borrowings;
hh
exchange differences on transactions entered into to hedge certain foreign currency risks (see below under derivative
financial instruments); and
hh
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are
recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial
disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case
the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity (attributed to non‑controlling interests as appropriate).
Leasing
Leases are classified as finance leases wherever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges
and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which
case they are capitalised in accordance with the Group’s general policy on borrowing costs (see previous page).
Rentals payable under operating leases are charged to income on a straight‑line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight‑line basis
over the lease term.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets
Financial assets are recognised and de‑recognised on the trade date where the purchase or sale of a financial asset
is under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified
as fair value through profit or loss which are initially measured at fair value.
Other financial assets are classified into the following specified categories: financial assets as ‘at fair value through profit
and loss’ and ’loans and receivable’. The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective
interest method less impairment. Interest is recognised by applying the effective interest rate, except for short‑term
receivables when the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each
balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events
that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been
impacted. For loans and receivables the amount of the impairment is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate.
Bioquell PLC
37
Overview
Impairment of financial assets continued
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables where the carrying amount is reduced through the use of an allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognised in profit or loss.
With the exception of available‑for‑sale equity instruments, if, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed but does not exceed what the amortised cost would have been
had the impairment not been recognised.
Business review
De‑recognition of financial assets
The Group de‑recognises a financial asset only when the contractual rights to the cash flows from the asset expire;
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have
to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other short‑term highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement
entered into.
Debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if it is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or
loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in
the ‘other gains and losses’ line item in the income statement. Fair value is determined in the manner described in note 20.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised
on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and
of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group
uses foreign exchange forward contracts to hedge these exposures. The Group does not use derivative financial
instruments for speculative purposes.
The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors which provides
written principles on the use of financial derivatives. Changes in the fair value of derivative financial instruments that
do not qualify for hedge accounting are recognised in the income statement as they arise.
Derivatives not designated into an effective hedge relationship are classified as a current asset or a current liability.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ (“FVTPL”) or other
financial liabilities.
Trade payables
Trade payables are not interest‑bearing and are stated at their nominal value.
38
Bioquell PLC
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
Provisions for warranty costs are recognised at the date of sales of the relevant products, at management’s best estimate
of the expenditure required to settle the Group’s liability.
Share‑based payments
The Group has applied the requirements of IFRS 2 Share‑based Payments. In accordance with the transitional provisions,
IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005.
The Group is able to issue equity‑settled and cash‑settled share‑based payments to certain employees. Equity‑settled
share‑based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the
equity‑settled share‑based payments is expensed on a straight‑line basis over the vesting period, based on the Group’s
estimate of shares that will eventually vest. Fair value is measured by use of the Black‑Scholes model. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of non‑transferability,
exercise restrictions and behavioural considerations.
3. Critical accounting judgements and key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below. Conditions for recognition are as set out in our accounting policies in note 2.
Internally generated intangible assets
Internally generated intangible assets arising from the Group’s development activity are recognised when certain
conditions are met. Management applies certain assumptions in measuring development activity cost and in assessing
future economic benefits. Analysis is carried out and management remains confident that the carrying amount of the
asset will be recovered in full. Adjustments will be made in future periods if future market activity indicates that such
impairments are appropriate.
Valuation of share‑based payments
In order to determine the value of share‑based payments, management are required to make an estimation of the
effects of non‑transferability, exercise restrictions and behavioural considerations. Fair value is measured by use
of the Black‑Scholes model and the inputs used are set out in note 33.
Impairment of other intangible assets
Management applies certain assumptions in assessing impairment of other intangible assets. These assumptions
are subject to annual impairment review, the assumptions for which are disclosed in note 13.
4. Revenue
An analysis of the Group’s revenue is as follows:
Sales of goods
Revenue from the rendering of services
Interest
2012
£’000
2011
£’000
15,828
25,167
40,955
2
40,957
16,894
24,362
41,256
5
41,261
39
Bioquell PLC
Year ended 31 December 2012
Consolidated
£’000
25,927
15,068
40,995
2,619
3,031
5,650
(1,452)
4,198
(245)
3,953
41
3,994
1,300
6,990
—
6,990
3,745
44
3,789
2,600
1,145
Bio-Decon
£’000
TRaC
£’000
Consolidated
£’000
26,580
11,333
37,913
4,730
42,643
8,211
3,010
11,221
692
11,913
Assets and liabilities are allocated to reportable segments.
Balance sheet as at 31 December 2012
Assets
Segment assets
Unallocated corporate assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Consolidated total liabilities
5,690
Profit for the year
Other information
Capital additions
Unallocated corporate additions
Total capital additions
Depreciation and amortisation
Unallocated corporate depreciation
Total depreciation and amortisation
TRaC
£’000
Business review
Revenue
Total revenue
Result
Segment result
Unallocated head office costs
Finance costs and investment revenue
Profit before tax
Tax
Bio-Decon
£’000
Overview
5. Business and geographical segments
For management purposes, the Group is currently organised into two divisions – Bio‑decontamination (“Bio-Decon”)
and TRaC (“Testing, Regulatory and Compliance”). These divisions are consistent with the internal reporting as reviewed
by the Chief Executive. Segment information about these businesses is presented below:
40
Bioquell PLC
5. Business and geographical segments continued
Year ended 31 December 2011
Revenue
Total revenue
Result
Segment result
Unallocated head office costs
Finance costs and investment revenue
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Unallocated corporate additions
Total capital additions
Depreciation and amortisation
Unallocated corporate depreciation
Total depreciation and amortisation
Bio-Decon
£’000
TRaC
£’000
Consolidated
£’000
27,657
13,599
41,256
3,799
2,433
6,232
(1,210)
5,022
(21)
5,001
(1,136)
3,865
3,215
2,786
2,269
1,141
6,001
4
6,005
3,410
44
3,454
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2.
Segment profit represents the profit earned by each segment without allocation of central administration costs including
Directors’ salaries, investment revenue and finance costs and income tax expense. This is the measure reported to the
Group’s Chief Executive for the purpose of resource allocation and assessment of segment performance.
Balance sheet as at 31 December 2011
Assets
Segment assets
Unallocated corporate assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Consolidated total liabilities
Bio-Decon
£’000
TRaC
£’000
Consolidated
£’000
23,544
10,099
33,643
5,902
39,545
(8,131)
(3,157)
(11,288)
(658)
(11,946)
Geographical segments
The Group’s bio‑decontamination equipment is manufactured within the UK and sold into the UK, Europe and
Rest of World markets. The TRaC segment offers services from bases within the UK and the majority of its revenue
is generated within the UK.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the
goods or services:
Sales revenue by geographical market
UK
Rest of Europe
Rest of World
Year ended
31 December
2012
£’000
Year ended
31 December
2011
£’000
18,543
8,584
13,868
40,995
17,686
8,211
15,359
41,256
41
Bioquell PLC
Carrying amount
of segment assets
Overview
5. Business and geographical segments continued
Geographical segments continued
The following is an analysis of the carrying amount of segments assets, and additions to property, plant and equipment
and intangible assets, analysed by the geographical area in which the assets are located:
Additions to property, plant and equipment
and intangible assets
Year ended
31 December
2011
£’000
Year ended
31 December
2012
£’000
Year ended
31 December
2011
£’000
35,018
3,816
3,809
42,643
32,538
3,579
3,428
39,545
6,734
103
153
6,990
5,812
79
114
6,005
UK
Rest of Europe
Rest of World
6. Profit from operations
Profit from operations has been arrived at after charging/(crediting):
2012
£’000
1,297
2,664
1,112
13
7,154
19,265
2
(190)
2011
£’000
1,197
2,542
906
6
8,806
17,048
1
(291)
Research & development costs
Depreciation of property, plant and equipment
Amortisation of development costs and patents
Amortisation of trademarks
Cost of inventories recognised as an expense
Staff costs (see note 7)
Loss on disposal of property, plant and equipment
Net foreign exchange gains
Business review
Year ended
31 December
2012
£’000
A more detailed analysis of auditors’ remuneration is provided below:
2011
£’000
29
96
125
4
19
23
27
90
117
4
27
31
A description of the work of the audit committee is set out in the Corporate Governance Statement on pages 19 to 20 and
includes an explanation of how auditor objectivity and independence is safeguarded when non‑audit services are provided
by the auditors.
7. Staff costs
The average monthly number of employees (including Executive Directors) was:
Production shop‑floor
Engineering directs
Sales and marketing
Administration
Other
2012
Number
2011
Number
118
142
260
92
48
31
171
431
95
145
240
81
50
35
166
406
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
Fees payable to the Company’s auditors for the audit of the subsidiaries pursuant to legislation
Total audit fees
Audit related assurance services
Taxation compliance services
Total non‑audit fees
2012
£’000
42
Bioquell PLC
7. Staff costs continued
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2012
£’000
2011
£’000
16,455
1,872
703
235
19,265
14,631
1,656
534
227
17,048
Details of Directors’ remuneration, share options and pension contributions are included in the element of the Directors’
Remuneration Report, marked as audited, on pages 22 and 23.
8. Investment revenues
Bank deposits
Change in fair value of derivative financial instruments
2012
£’000
2011
£’000
2
—
2
5
50
55
2012
£’000
2011
£’000
58
189
—
247
43
—
33
76
2012
£’000
2011
£’000
(19)
176
(235)
119
41
(811)
(75)
(307)
57
(1,136)
9. Finance costs
Interest on bank loans and overdrafts
Change in fair value of derivative financial instruments
Dividend payable on 7.5% preference shares
10. Tax
UK corporation tax current year
UK corporation tax prior year
Deferred tax charge current year
Deferred tax adjustment prior year
Corporation tax is calculated at 24.5% (2011: 26.5%) of the estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
43
Bioquell PLC
2012
£’000
3,953
(968)
5,001
(1,325)
(107)
40
420
—
74
(92)
295
(7)
386
41
(84)
(108)
361
(3)
22
(99)
(18)
13
105
Business review
Profit before tax
Tax at the UK corporation rate of 24.5% (2011: 26.5%)
Adjusted for:
Tax effect of expenses not deductible in determining taxable profit
Effect on deferred tax asset of movement in share price
Effect of research and development relief
Tax due in other jurisdictions
Tax effect of different tax rate of subsidiaries operating in other jurisdictions
Deferred tax not recognised on other timing differences
Prior year adjustment
(Recognition)/utilisation of tax losses
Effective change in tax rate
2011
£’000
Overview
10. Tax continued
The charge for the year can be reconciled to the profit per the income statement as follows:
(1,136)
In addition to the amount charged to the income statement an amount of £6,000 was credited directly to equity
(2011: charge to equity of £16,000). This related to the estimated excess tax deductions related to share‑based payments.
Earnings
Earnings for the purposes of basic earnings per share being net profit attributable
to equity holders of the parent
Year ended
31 December
2011
£’000
3,994
3,865
Year ended
31 December
2012
£’000
Year ended
31 December
2011
£’000
41,762,635
41,753,449
428,345
42,190,980
77,492
41,830,941
Year ended
31 December
2012
£’000
Year ended
31 December
2011
£’000
1,182
1,279
1,094
1,182
12. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2011 of 2.83p per share (2010: 2.62p)
Proposed final dividend for the year ended 31 December 2012 of 3.06p per share (2011: 2.83p)
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
– share options
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Year ended
31 December
2012
£’000
11. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
44
Bioquell PLC
13. Goodwill
£’000
Cost
As at 1 January 2011, 1 January 2012 and 31 December 2012
Accumulated impairment
As at 1 January 2011, 1 January 2012 and 31 December 2012
Carrying amount
As at 31 December 2012
705
14
691
691
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (“CGUs”) that are
expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows:
Bio‑decontamination segment
TRaC segment
2012
£’000
2011
£’000
—
691
691
—
691
691
The Group tests goodwill annually for impairment, based on estimated future cash flows and discounted at a rate
reflecting current market assessments of the time value of money and the risks specific to the business segments, or more
frequently if there are indications that goodwill might be impaired. The Group prepares discounted cash flows using the
most recent financial budgets approved by the management and assumes an estimated extrapolated growth rate of 2%
(2011: 2%) per year over three (2011: three) years. The cash flows are discounted at a rate of 12% (2011: 15%).
Management believes that no reasonable potential change in any of the above assumptions would cause the carrying
value of goodwill to exceed it recoverable amount.
14. Other intangible assets
Cost
As at 1 January 2011
Additions
Effect of foreign exchange
Additions
Amortisation
Charge for the year
Charge for the year
Carrying amount
Total
intangible
assets
£’000
Customer
relationships
£’000
Development
costs and
patents
£’000
619
—
—
619
—
—
619
12,321
2,024
—
14,345
3,753
—
18,098
66
22
(2)
86
133
(5)
214
13,006
2,046
(2)
15,050
3,886
(5)
18,931
619
—
—
619
—
—
619
4,317
906
—
5,223
1,112
—
6,335
56
6
(2)
60
13
(2)
71
4,992
912
(2)
5,902
1,125
(2)
7,025
—
—
11,763
9,122
143
26
11,906
9,148
Trademarks
and licences
£’000
The amortisation period for development costs and patents incurred on the Group’s product development is 15 years.
Trademarks are amortised over their estimated useful lives, which is on average five years, although patent protections
extends to 20 years. Customer relationships are amortised over five years.
45
Bioquell PLC
Land
Assets
Short‑term
and
under
leasehold
buildings construction improvements
£’000
£’000
£’000
Total
£’000
—
89
—
—
89
—
(89)
—
—
—
1,124
346
—
—
1,470
322
89
—
2
1,883
16,880 23,266
3,492
3,959
(47)
(47)
(4)
(4)
20,321 27,174
3,104
2,782
—
—
(137)
(137)
(30)
(32)
22,934 30,111
633
338
—
—
971
386
—
—
1,357
—
—
—
—
—
—
—
—
—
534
173
—
—
707
232
—
1
940
10,046 11,213
2,542
2,031
(24)
(24)
3
3
12,056 13,734
2,664
2,046
(78)
(78)
(26)
(27)
13,997 16,294
3,937
4,323
—
89
943
763
8,937 13,817
8,265 13,440
Freehold land and buildings with a carrying amount of £0.9m (2011: £0.9m) have been pledged to secure borrowings of the Group
(see note 19). The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
16. Subsidiaries
A list of the significant investments in subsidiaries, including name and country of incorporation, is given in note 5 to the
Company’s separate financial statements.
17. Inventories
Raw materials, spare parts and consumables
Work in progress
Finished goods and goods for resale
2012
£’000
2011
£’000
1,480
499
773
2,752
906
179
198
1,283
The Group had no capital expenditure contracted but not provided for at the year end (2011: £nil).
5,262
32
—
—
5,294
—
—
—
—
5,294
Business review
Cost
Additions
Disposals
Additions
Transferred on completion
Disposals
Accumulated depreciation
Charge for the year
Disposals
Charge for the year
Disposals
Carrying amount
Fixtures
and
equipment
£’000
Overview
15. Property, plant and equipment
46
Bioquell PLC
18. Trade and other receivables
Trade debtors
Other debtors
Prepayments and accrued income
2012
£’000
2011
£’000
7,784
264
2,009
10,057
8,301
145
1,003
9,449
All trade and other receivables are short‑term and non‑interest bearing. The Directors consider that the carrying amount
of trade and other receivables approximates their fair value.
Trade receivables
Allowance for doubtful debts
2012
£’000
2011
£’000
7,824
(40)
7,784
8,321
(20)
8,301
The debtor days taken on sales of goods is 69 days (2011: 73 days). Included in the Group’s trade receivable balance are
debtors with a carrying amount of £885,000 (2011: £650,000) which are past due at the reporting date for which the Group
has not provided as there has not been a significant change in credit quality and the Group believes that the amounts
are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these
receivables is 76 days (2011: 74 days).
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit
ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved
by senior management on a regular basis.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.
Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group does not have any
significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.
The credit risk on liquid funds and derivative financial instruments are limited because the counterparties are banks with
high credit ratings assigned by international credit‑rating agencies.
Ageing of past due but not impaired receivables
Not yet due
Up to one month overdue
Up to two months overdue
Total
2012
£’000
2011
£’000
6,939
583
302
7,824
7,671
316
334
8,321
47
Bioquell PLC
2012
£’000
20
(2)
22
40
Balance at 1 January
Amounts written off during the year
Increase/(decrease) in the allowance recognised in the year
Balance at 31 December
2011
£’000
29
(4)
(5)
20
19. Bank overdrafts and loans
1,073
1,177
105
968
1,073
105
1,072
1,177
Total
£’000
Sterling
£’000
Euro
£’000
1,073
1,073
—
Total
£’000
Sterling
£’000
Euro
£’000
1,177
1,177
—
2012
%
2011
%
2
2
Analysis of borrowings by currency:
31 December 2012
Bank loans
Analysis of borrowings by currency:
31 December 2011
Bank loans
The weighted average interest rates paid were as follows:
Bank loans
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and cash balances. The Group continually
monitors forecast and actual cash flows. The Group had committed overdraft facilities available at 31 December 2012 of
£2,600,000 (2011: £2,600,000), the facility was undrawn at the end of the year. The facility is reviewed each year.
Capital risk management is summarised in the Directors’ Report.
The bank loan is secured on the long lease property in Andover, UK which was purchased in 2008. The loan was taken out
with an interest rate of 1.25% over base rate, repayable over 15 years. With the exception of the bank loan all of the Group’s
financial liabilities mature in one year or less or on demand.
2011
£’000
2012
£’000
Business review
In determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due
to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further need for a credit
provision in excess of the allowances for doubtful debts.
Bank loans
The borrowings are repayable as follows:
Amount due for settlement within twelve months
Amount due for settlement after twelve months (see note 24)
Overview
18. Trade and other receivables continued
Movement in the allowance for doubtful debts
48
Bioquell PLC
20. Derivative financial instruments – currency derivatives
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments
and receipts within 70 to 80% of the exposure generated. The Group also enters into forward foreign contracts to manage
the risk associated with anticipated sales and purchase transactions out to six months within 40 to 50% of the exposure
generated. Forward exchange contracts are carried at fair value through profit and loss.
At the balance sheet date, total notional amount of outstanding forward foreign exchange contracts that the Group has
committed are as below:
Forward foreign exchange contracts
2012
£’000
2011
£’000
1,630
5,840
At 31 December 2012, the fair value of the Group’s currency derivatives is estimated to be approximately £(9,000)
(2011: £180,000). The fair value has been calculated as the present value of future expected cash flows at market related
rates, which are current at the balance sheet date. The value is calculated using readily available market data and
represents a level 2 measurement in the fair value hierarchy under IFRS 7.
Other financial assets
2012
£’000
2011
£’000
(9)
Financial assets carried at fair value through profit and loss
180
Foreign currency risk management
The Group is mainly exposed to US Dollars and Euros. The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved
policy parameters utilising forward foreign exchange contracts. The carrying amount of the Group’s foreign currency
denominated monetary assets and monetary liabilities at the reporting date is as follows:
Liabilities
2012
£’000
(1,382)
(311)
(323)
USD
Euro
Sing$
Assets
2011
£’000
(1,367)
(281)
(129)
2012
£’000
2011
£’000
4,536
4,461
1,312
3,948
4,445
1,849
Market risk exposure to foreign currency is measured using sensitivity analysis as described below.
Foreign currency sensitivity
The following table details the Group’s sensitivity to a 10% change in pounds sterling against the respective foreign
currencies. The 10% is the rate used when reporting foreign currency risk internally to key management personnel and
represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis of the
Group’s exposure to foreign currency risk at the reporting date has been determined based on the change taking place
at the beginning of the financial year and held constant throughout the reporting period. A positive number indicates
an increase in profit or loss and other equity where pounds sterling strengthens against the respective currency.
Sing$ impact
2012
£’000
Profit or loss
Equity
(26)
(37)
USD impact
2011
£’000
5
11
Euro impact
2012
£’000
2011
£’000
2012
£’000
(227)
(242)
(219)
(182)
(104)
11
2011
£’000
The Group has considered its sensitivity to interest rate fluctuations and does not believe that a change in interest rates
would have a material impact on the financial statements.
(96)
(35)
49
Bioquell PLC
Deferred
development
costs
£’000
Accelerated
capital
allowances
£’000
Other
timing
differences
£’000
Total
£’000
(2,182)
—
(99)
318
(2)
(79)
(627)
59
(45)
67
—
(84)
(2,424)
57
(307)
(2,281)
—
(2,281)
—
(425)
237
—
237
58
(32)
(613)
—
(613)
61
140
(17)
(16)
(33)
—
82
(2,674)
(16)
(2,690)
119
(235)
(2,706)
—
(2,706)
263
—
263
(412)
—
(412)
49
6
55
(2,806)
6
(2,800)
Deferred tax assets
Deferred tax liabilities
175
(2,975)
(2,800)
2011
£’000
175
(2,865)
(2,690)
The Finance Act 2012, which provides for a reduction in the main rate of corporation tax from 25% to 24%, effective
from 1 April 2012, was substantively enacted on 5 July 2012. The impact of the rate reduction has been reflected in
the calculation of the UK deferred tax liability provided at 31 December 2012.
22. Trade and other payables
Trade creditors
Other creditors
Accruals and deferred income
2012
£’000
2011
£’000
3,552
790
3,438
7,780
3,298
498
3,558
7,354
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The
average credit period taken for trade purchases is 56 days (2011: 57 days). The Directors consider that the carrying amount
of trade payables approximates to their fair value. The Group has financial risk management policies in place to ensure that
all payables are paid within the credit timeframe.
At the balance sheet date, the Group had an unrecognised deferred tax asset of £35,000 (2011: £41,000). At 31 December 2012
a net deferred tax liability of £2,800,000 (2011: £2,690,000) has been recognised. The Group has been profitable in the
year and the Directors forecast a profit for the next year’s trading. They therefore deem the deferred tax balance to be
recoverable in full.
2012
£’000
Business review
At 1 January 2011
Charge to income
Net (charge)/credit
to income statement
Charge to equity
At 1 January 2012
Charge to income
Net (charge)/credit
to income statement
Charge to equity
At 31 December 2012
Tax
losses
£’000
Overview
21. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the
current and prior reporting period.
50
Bioquell PLC
23. Provisions
Warranty
provision
£’000
At 1 January 2012
Additional provision in the year
Utilisation of provision
At 31 December 2012
Included in current liabilities
Included in non‑current liabilities
93
60
(77)
76
76
—
76
The warranty provision represents management’s best estimate of the Group’s liability under twelve month warranties
granted on products and services, based on past experience.
24. Other non‑current liabilities
Bank loans (see note 19)
2012
£’000
2011
£’000
968
1,072
The fair value of the financial liabilities is approximately equal to book value due to the short maturity of the liabilities
or because they bear interest at rates approximate to the market.
25. Share capital
2012
Authorised
Ordinary shares of 10p each
Redeemable deferred ordinary shares
of £1 each
Called up, allotted and fully paid
2011
Number
£’000
Number
£’000
55,947,780
5,595
55,947,780
5,595
255,222
255
5,850
255,222
255
5,850
41,793,949
4,179
4,179
41,753,449
4,175
4,175
During the year the Company issued a total of 40,500 ordinary shares of 10p each for £46,000 on the conversion of options
under the executive share option schemes.
26. Share premium account
£’000
Balance at 1 January 2011
Premium arising on issue of equity shares
Balance at 31 December 2011
165
3
168
42
210
Bioquell PLC
51
£’000
Credit to equity for share‑based payments
Charge to equity on exercise of options
1,305
227
(16)
1,516
235
(21)
6
1,736
£’000
Balance at 1 January 2011 and 1 January 2012
Additions
Balance at 31 December 2011 and 31 December 2012
255
—
255
Business review
28. Capital reserve
Overview
27. Equity reserve
29. Translation reserve
Effects of foreign exchange in the period
Effects of foreign exchange in the period
(109)
1
(108)
32
(76)
£’000
30. Retained earnings
Transfer from Special Reserve
Payment of dividend
Exercised share options
Payment of dividend
Exercised share options
7,889
3,865
10,933
(1,094)
—
21,593
3,994
(1,182)
21
24,426
£’000
52
Bioquell PLC
31. Notes to the cash flow statement
Adjustments for:
Depreciation of property, plant and equipment
Amortisation and impairment losses of intangible assets
Loss on disposal of property, plant and equipment
(Decrease)/increase in provisions
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in receivables
Increase/(decrease) in payables
Cash generated by operations
Non‑equity preference share dividends paid
Investment revenues
Interest paid
Income taxes paid
Net cash from operating activities
2012
£’000
2011
£’000
4,198
5,022
2,664
1,125
235
1
(17)
8,206
(1,482)
(658)
540
6,606
—
2
(58)
(535)
6,015
2,544
912
227
1
22
8,728
21
(1,380)
(251)
7,118
(33)
5
(43)
(638)
6,409
Of the new additions to fixtures and equipment during the year assets to the value of £nil (2011: £nil) were financed by new
finance leases. Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet)
comprise cash at bank and other short‑term highly liquid investments with a maturity of three months or less.
32. Operating lease arrangements
Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are
negotiated for an average term of four years and rentals are generally fixed for the period of the lease. There are
no options to purchase within the agreements.
Minimum lease payments under operating leases recognised in income for the year
2012
£’000
2011
£’000
1,308
1,090
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under
non‑cancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2012
£’000
2011
£’000
1,239
3,228
3,105
7,572
1,154
2,894
2,888
6,936
33. Share‑based payments
Equity‑settled share option schemes
The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the
average quoted market price of the Company’s shares on the date of grant. The vesting period is three years. If the options
remain unexercised after a period of ten years from the date of grant, the options expire. Options are forfeited if the
employee leaves the Group before the options vest except in certain circumstances in accordance with the Scheme Rules.
Special options with market‑based conditions, have also been granted to certain Directors (as disclosed in the Directors’
Remuneration Report) and senior members of staff.
53
Bioquell PLC
Overview
33. Share‑based payments continued
Equity‑settled share option schemes continued
Details of the share options outstanding during the year are as follows:
2012
Number of
share options
4,945,237
1,274,000
(693,050)
(40,500)
5,485,687
1,503,200
126.3p
122.5p
116.5p
112.7p
126.8p
130.7p
Weighted
average
exercise
price
pence
Number of
share options
5,367,737
1,198,500
(1,617,000)
(4,000)
4,945,237
1,110,240
133.4p
104.0p
133.2p
84.0p
126.3p
137.6p
The Black‑Scholes model has been adopted as the Directors believe it provides a reasonable approximation to the
fair values of the options concerned.
The inputs into the Black‑Scholes model are as follows:
Weighted average share price
Expected volatility
Expected life
Risk free rate
Expected dividends
2012
2011
122.5p
32%
4.5yrs
1.57%
1.5%
104.0p
32%
4.5yrs
1.34%
1.5%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous
five years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects
of non‑transferability, exercise restrictions, and behavioural considerations.
Outstanding at the beginning of the period were options awarded in tranches of 540,000 (September 2006), 160,000
(March 2007) and 167,200 (May 2008) which were granted at an exercise price of 109.0p, 128.0p and 174.5p respectively,
to certain senior members of staff again conditional upon the market‑based condition. The inputs into the Black‑Scholes
model are as set out in the table above, adjusted by a factor based on the probability of meeting the market‑based condition.
The Group recognised total expenses of £235,000 and £227,000 related to equity‑settled share‑based payment
transactions in 2012 and 2011 respectively.
34. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are therefore not disclosed.
Remuneration of key management personnel
The total remuneration for all of the Directors of Bioquell PLC, who are the key management personnel of the Group, is set
out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the
remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration Report on pages 21 to 24.
Short‑term employee benefits
Post‑employment benefits
2012
£’000
2011
£’000
766
79
79
924
911
73
102
1,086
Each tranche of share options was valued separately using the actual exercise price.
The weighted average share price at the date of exercise for share options exercised during the period was 112.7p.
The options outstanding at 31 December 2012 had a weighted average exercise price of 126.8p, and a weighted average
remaining contractual life of 4.55 years. In 2012, 1,274,000 options were granted on 29 March. The aggregate of the
estimated fair values of the options granted on that date was £381,211. In 2011, 1,198,500 options were granted on
23 March. The aggregate of the estimated fair values of the options granted on that date was £287,601.
Business review
Outstanding at beginning of period
Granted during the period
Lapsed during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
2011
Weighted
average
exercise
price
pence
54
Bioquell PLC
Five year summary
IFRS
2012
£’000
2011
£’000
2010
£’000
2009
£’000
2008
£’000
40,995
41,256
39,403
39,233
34,405
Operating profit
4,198
5,022
3,237
5,645
5,209
Profit for the year before tax
3,953
5,001
3,261
5,856
5,003
30,730
27,599
24,613
22,963
19,363
Earnings per share
9.6p
9.3p
5.8p
10.3p
9.0p
Dividend per share
3.06p
2.83p
2.62p
2.42p
2.2p
Revenue
Equity
55
Bioquell PLC
company balance sheet
as at 31 December 2012
2012
£’000
2011
£’000
Investments
5
8,692
8,554
Property, plant and equipment
4
883
927
9,575
9,481
Fixed assets:
Overview
Notes
Results for the Company are presented under UK GAAP
Current assets:
6
1,638
1,630
6
2,888
2,814
2,514
3,838
7,040
8,282
(415)
(587)
6,625
7,695
16,200
17,176
(968)
(1,072)
15,232
16,104
Cash at bank and in hand
Creditors: amounts falling due within one year
7
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
7
Net assets
Capital and reserves:
Called up share capital
8
4,179
4,175
Share premium account
9
210
168
10
1,748
1,513
11
255
255
Profit and loss account
12
8,840
9,993
15,232
16,104
Shareholders’ funds
The financial statements of Bioquell PLC, registered number 00206372 were approved by the Board of Directors and
signed on its behalf by:
Director
Director
19 March 2013
19 March 2013
Equity reserve
Capital reserve
– due within one year
– due after one year
Business review
Debtors
56
Bioquell PLC
notes to the company financial statements
1. Significant accounting policies
Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been
prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards
and law.
The principal accounting policies are summarised below. They have been applied consistently throughout the current year
and the preceding year.
Going concern
Going concern has been applied on a Group basis. Refer to page 33 of the Group accounts.
The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risk, including
foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date a derivative contract is
entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive
fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial
liability. The resulting gain or loss is recognised in the profit and loss account. A derivative is presented as a non‑current
asset or a non‑current liability if the remaining maturity of the instrument is more than twelve months and it is not expected
to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.
Investments
Fixed asset investments in subsidiaries and associates are shown at cost less provision for any impairment.
Tangible fixed assets
Tangible fixed assets are stated at cost, net of depreciation and provision for any impairment. Depreciation is provided
on all tangible fixed assets at rates calculated to write off the cost or valuation, less estimated residual value, of each asset
on a straight‑line basis over its expected useful life, as follows:
Plant and equipment
3 to 8 years
Property25 years
Residual value is calculated on prices prevailing at the date of acquisition or revaluation.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using
the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full on material timing differences at the rate of tax anticipated to apply when these differences
crystallise. Timing differences arise from the inclusion of items of income and expenditure in tax computations in periods
different from those in which they are included in the financial statements. A deferred tax asset is only recognised where
it is more likely than not that it will be recoverable in the future. Deferred tax assets and liabilities are not discounted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences
are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance
sheet date.
Refer to the policy statement in note 2 to the Group accounts.
2. Profit for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss
account for the year. Bioquell PLC has reported a profit after tax and the cost of share‑based payments (£90,000; 2011: £114,000)
for financial year ended 31 December 2012 of £92,000 (2011: profit of £309,000).
The auditors’ remuneration for the audit services to the Company was £29,000 (2011: £28,000).
57
Bioquell PLC
2012
2011
4
4
2012
£’000
2011
£’000
876
128
87
1,091
719
111
81
911
Property
£’000
Plant and
equipment
£’000
Total
property,
plant and
equipment
£’000
1,054
—
1,054
57
—
57
1,111
—
1,111
138
42
180
46
2
48
184
44
228
874
916
9
11
883
927
Administration
Overview
3. Staff costs
The average monthly number of employees (including Executive Directors) of the Company was:
Their aggregate remuneration comprised:
4. Fixed assets
Location
Bioquell UK Ltd
Bioquell Holding SAS
TRaC Global Ltd
TRaC Telecoms & Radio Ltd
TRaC EMC & Safety Ltd
Bioquell Global Logistics (Ireland) Ltd
Bioquell Asia Pacific Pte Ltd
Bioquell Technology (Shenzhen) Ltd
Bioquell Hong Kong Ltd
Bioquell Inc
Bioquell Defense Inc
Bioquell Professional Services Inc
Andover, UK
Paris, France
Warwick, UK
Kingston Upon Hull, UK
Malvern, UK
Limerick, Republic of Ireland
Singapore
Shenzhen, China
Hong Kong
Pennsylvania, USA
Pennsylvania, USA
Pennsylvania, USA
The principal activities of the above companies include the design, manufacture and supply of bio‑decontamination
and containment equipment, related products and services to the pharmaceutical, healthcare, food and defence
industries, and testing services to the aerospace, telecoms, defence and other industries.
5. Fixed asset investments
The companies listed below are wholly owned subsidiaries of the Company, incorporated in Great Britain, unless
otherwise stated.
Cost
Additions
Accumulated depreciation
Charge for the year
Net book value
Business review
Wages and salaries
Social security costs
Other pension costs
58
Bioquell PLC
notes to the company financial statements continued
5. Fixed asset investments continued
Investment in subsidiaries
Shares
£’000
Cost
Foreign exchange differences
Additions – capital contribution made to subsidiaries
Provision for impairment
As at 1 January 2012 and 31 December 2012
Net book value
Loans
£’000
Total
£’000
111
—
—
111
9,102
(7)
145
9,240
9,213
(7)
145
9,351
(103)
(556)
(659)
8
8
8,684
8,546
8,692
8,554
2012
£’000
2011
£’000
1,049
436
—
153
1,638
938
390
180
122
1,630
2,888
4,526
2,814
4,444
2012
£’000
2011
£’000
—
85
105
9
216
415
44
279
105
—
159
587
968
968
1,072
1,072
6. Debtors
Debtors due within one year:
Amounts due from subsidiary undertakings
Corporation and other tax
Derivative financial instruments (see note 20 of the Group accounts)
Prepayments and accrued income
Debtors due after one year:
Amounts due from subsidiary undertakings
Total debtors
7. Creditors
Amounts falling due within one year:
Amounts due to subsidiary undertakings
Accruals and deferred income
Bank loan
Deferred tax
Amounts falling due after one year:
Bank loan
59
Bioquell PLC
2012
Authorised
Redeemable deferred ordinary shares
of £1 each
Called up, allotted and fully paid up
2011
£’000
Number
£’000
55,947,780
5,595
55,947,780
5,595
255,222
255
5,850
255,222
255
5,850
41,793,949
4,179
4,179
41,753,449
4,175
4,175
During the year the Company issued a total of 40,500 ordinary shares of 10p each for £46,000 on the conversion of options
under the executive share options schemes, which is being used to provide additional working capital.
9. Share premium account
Business review
Number
Overview
8. Called up share capital
£’000
165
3
168
42
210
10. Equity reserves
£’000
1,286
113
114
1,513
90
145
1,748
11. Capital reserves
£’000
Balance at 1 January 2011 and 1 January 2012
Additions
255
—
255
12. Profit and loss account
£’000
Profit for the financial year
Transfer from Special Reserve
Dividends paid in the year
Exchange loss
(155)
309
10,933
(1,094)
9,993
92
(1,182)
(63)
8,840
Credit to equity for share‑based payments to subsidiary employees
60
Bioquell PLC
notes to the company financial statements continued
13. Reconciliation of movements in shareholders’ funds
£’000
Issue of equity shares
Equity reserve – share‑based payments
Issue of equity shares
Equity reserve – share‑based payments
Exchange loss
16,659
3
114
113
309
(1,094)
16,104
46
90
145
92
(1,182)
(63)
15,232
14. Share‑based payments
Equity-settled share option schemes
The Company’s employees are able to participate in the Group’s share options schemes. Details of these schemes are
given in note 33 of the Group’s accounts.
Details of the share options outstanding with employees of the Company during the year are as follows:
2012
Number
of share
options
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2011
Weighted
average
exercise price
pence
1,394,887
453,000
(424,500)
—
1,423,387
84,000
Note 33 of the Group accounts describes the valuation of share options.
120.9
122.5
112.9
—
123.8
123.7
Number
of share
options
1,953,887
513,000
(1,072,000)
—
1,394,887
63,000
Weighted
average
exercise price
pence
132.5
104.0
134.1
—
120.9
126.5
BIOQUELL GROUP DIRECTORY
BIOQUELL ASIA PACIFIC
207 Henderson Road #01–05
Henderson Industrial Park
159550
Singapore
T:+65 6592 5145
F:+65 6227 5878
HULL
Unit E
South Orbital Trading Park
Hedon Road
Hull HU9 1NJ
UK
T:+44 (0)1482 801801
F:+44 (0)1482 801806
BIOQUELL CHINA
Room 102
Qingyi Photoelectricity Building
No.8, Langshan 2nd Road
North Section of
High-Tech Park
Nanshan District
Shenzhen
P.R.C. 518057
T:+86 755 8631 0348
F:+86 755 8631 0211
NORTH WEST
Unit 1
Pendle Place
Skelmersdale
West Lancs WN8 9PN
UK
T:+44 (0)1695 556666
F:+44 (0)1695 557077
WARWICK
Rothwell Road
Warwick CV34 5JX
UK
T:+44 (0)1926 478478
F:+44 (0)1926 478479
SOUTH
74–78 Condor Close
Woolsbridge Industrial Park
Three Legged Cross
Wimborne
Dorset BH21 6SU
UK
T +44 (0)1202 811700
F +44 (0)1202 811701
WATFORD
8 Century Court
Tolpits Lane
Watford
Hertfordshire WD18 9RS
UK
T:+44 (0)1923 229818
F:+44 (0)1923 226261
BIOQUELL FRANCE
153 Quai du Rancy
94380 Bonneuil sur Marne
Paris
France
T:+33 1 4378 1594
F:+33 1 4378 1584
MALVERN
100 Frobisher Business Park
Leigh Sinton Road
Malvern
Worcestershire WR14 1BX
UK
T:+44 (0)1684 571700
F:+44 (0)1684 571701
Business review
BIOQUELL INC
702 Electronic Drive
Suite 200
Horsham PA 19044
USA
T:+1 215 682 0225
F:+1 215 682 0395
BIOQUELL IRELAND
Unit E4
Eastway Business Park
Ballysimon Road
Limerick
Republic of Ireland
T: +353 61 603622
F:+353 61 603627
Overview
BIOQUELL UK
52 Royce Close
West Portway
Andover SP10 3TS
UK
T:+44 (0)1264 835835
F:+44 (0)1264 835836
Shareholder information
BIOQUELL PLC
52 Royce Close
West Portway
Andover
Hampshire SP10 3TS
T: +44 (0)1264 835900
F: +44 (0)1264 835901
E:enquiries@bioquellplc.com
W:www.bioquellplc.com

2012 Annual Report

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