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ILIKA PLC — Annual Report 2018
Jul 11, 2018
7701_10-k_2018-07-11_61d5b3af-e4a2-4afc-bf46-444321b45aec.html
Annual Report
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RNS Number : 2265U
Ilika plc
11 July 2018
ILIKA plc
(The "Company" or the "Group")
Final Results
Financial Statements for year ended 30th April 2018
Ilika (AIM: IKA), a pioneer in solid-state battery technology and materials innovation, announces its full-year results for the year ended 30 April 2018.
Operational highlights:
· Implementation of Stereax® development programmes with three commercial partners:
o Deployment in miniature medical implants with a leading bioelectronics company
o Collaboration with Lightricity (ex-Sharp) to integrate Stereax® solid state batteries with photovoltaic technology
o Deployment of Stereax® M250 cells with Titan Wind Energy, in condition monitoring devices for wind turbines
· Collaboration with global eight OEM's to develop new functional materials:
o Protected anodes for lithium sulphur batteries with Johnson Matthey
o Advanced battery materials and fuel cell catalysts that can power future zero-emissions and carbon-neutral vehicles with Toyota Research Institute
o Photonic materials for high capacity Hard Disk Drives with Seagate
o P-type semiconductors for flexible integrated circuits with PragmatIC and Arm
o Superalloys with Rolls Royce
o Self-healing alloys with BAE Systems and GKN
· Award of ISO9001 certification to Ilika's quality management system.
· Post year end: offer of £4.1m grant funding from the Faraday Challenge to develop large format solid-state cells for automotive in collaboration with Honda, Ricardo, McLaren and A123 Batteries.
Financial highlights:
· Revenues £2.1m (2017: £1.1m)
· Loss for the year £2.9m (2017: £3.5m)
· Loss per share 3.7p (2017: 4.8p)
· Cash, cash equivalents and bank deposits of £2.8m (2017: £5.4m)
Commenting on the results Ilika's Chairman, Mike Inglis, said: "The past year has seen strong progress from Ilika both operationally and financially. The Stereax® pilot line has produced samples of Ilika's batteries for evaluation by 12 partners around the world. Feedback from those evaluations has been positive and underpins our ongoing commercialisation efforts. Following market demand we have extended our roadmap to include large format Stereax® cells for automotive power and I was delighted to see that Innovate UK has offered to support Ilika in two of the Faraday Challenge automotive collaborations with £4.1m of funding working with key industry players such as Honda, McLaren and Ricardo. Financially, revenue climbed over the £2m mark, with expectations of further growth in the year to come."
| For more information contact: Ilika plc |
www.ilika.com |
| Graeme Purdy, Chief Executive | Tel: 023 8011 1400 |
| Steve Boydell, Finance Director | |
| Liberum Capital Limited | Tel: 020 3100 2000 |
| Neil Elliot, Jill Li, William Hall | |
| Walbrook PR Ltd | Tel: 020 7933 8780 / [email protected] |
| Paul Cornelius | Mob: 07866 384 707 |
| Lianne Cawthorne | Mob: 07584 391 303 |
STRATEGIC REPORT
The Directors present their Strategic Report for the year ended 30th April 2018.
Principal Activities
Ilika plc is the holding company for Ilika Technologies Limited, a pioneer in solid-state battery technology and materials innovation. Ilika has developed ground-breaking solid-state battery technology (Stereax®). The Stereax® roadmap commences with miniature batteries designed to meet the demands of powering wireless devices, referred to as "the Internet of Things (IoT)". Stereax® technology was developed on Ilika's unique, patent protected high throughput materials development platform, which accelerates the discovery of new and patentable materials for identified end uses in the automotive, aeronautical and electronics sectors.
Business Strategy
The Company's mission is to have its Stereax® solid-state batteries integrated into market-leading products sold by leading commercialisation partners around the world. The Company generally expects these end-products to fit into or create end-markets worth in excess of $1 billion per year, in which the Directors believe a number of the Company's commercialisation partners are positioned to have a leading share.
The Company's revenue model involves three phases of activity: a) commercially-funded and grant-funded development projects; b) IP licensing; and c) receipt of royalties when products incorporating Ilika IP reach market. Ilika is currently in the first phase of activity, with its revenue being generated from a portfolio of development programmes. The Company has built a pipeline of licensing opportunities to support the start of its second phase of revenue generation.
The Company has developed its Stereax® batteries using its high throughput materials innovation platform. This platform uses automated processes to simultaneously deposit large arrays of systematically varying materials, which can be rapidly evaluated to determine their functional properties. In addition to the Stereax® product development and commercialisation work, the Company executes a small portfolio of programmes with large multinational companies to develop materials for the automotive, aerospace and electronic sectors.
Operating Review
Solid-State Batteries
Ilika has been working with solid-state battery technology since 2008 and has developed a type of lithium-ion battery, which, instead of using liquid or polymer electrolyte, uses a ceramic ion conductor.
Ilika's solid-state batteries have a number of benefits over lithium-ion batteries, including the following:
· Non-flammable
· 6x faster to charge
· 2x energy density on a weight basis
· 10x lower leakage currents
Stereax® Technology Roadmap
Ilika elected to focus its initial cell development on miniature devices suitable for powering sensors, sometimes called IoT end-nodes. There are already up to 15 billion sensors on the planet and most of them are currently either hard-wired or powered by disposable coin cells. Hard-wired sensors are expensive to install because of the cost of cabling, but thereafter they have low maintenance costs. Sensors powered by disposable batteries are relatively cheap to install, but expensive to maintain because of the cost of the maintenance crews deployed to replace the batteries at regular intervals. Ilika's miniature devices are designed to be combined with a small energy harvester (usually photovoltaic) to allow them to be recharged and therefore to operate for an extended period of time, usually up to ten years. This concept is designed to offer a low cost of installation compared to hard-wired devices combined with lower maintenance costs relative to using disposable coin cells.
IoT devices offer a different set of battery challenges compared to other electronic devices. They have similar pressures, such as cost and availability, but they also have some specific requirements:
o Small size in both footprint and thickness
o Ability to be trickle charged
o Charged only when an energy harvester can get energy
o Longer life span to match those of sensors and MCUs
o Support wider temperature ranges
Battery Product Launches
In 2016 and 2017, Ilika launched its Stereax® M250 and P180 solid state battery IP respectively. Both devices are designed to power IoT devices, with the P180 being specified to survive exposure to higher operating temperatures.
Relative to other miniature batteries, Ilika Stereax® batteries use patented materials and processes enabling superior energy density per battery footprint, up to 40% improvement on other solid-state solutions. Ilika's batteries do not contain any free lithium which makes them more moisture resistant. The Stereax® M250 operates in a temperature range to over 100°C, 30°C higher than other solid-state products. The Stereax® P180 has the additional benefit of supporting a temperature up to +150°C. This higher temperature is required for many Industrial IoT and Automotive end applications enabling always on, self-charging energy efficient IoT solutions for more demanding environments. As the trend towards digitising industrial processes gathers momentum there is a growing requirement for components with enhanced tolerance to temperature, moisture and vibration.
Battery products under development
The Ilika Stereax® roadmap focuses on three main areas:
· Miniaturisation. This looks at progressively smaller footprints, down to mm-scale, delivering smaller currents (µAh), making them ideal for small sensor driven devices. The principal commercial pull for these batteries is coming from the medical device industry, accounting for about 50% of the value of Ilika's licensing pipeline.
· Capacity. For the launch of both the M250 and the P180, Ilika designed and made some wireless sensor nodes measuring temperature, humidity and light intensity. The power requirements of sensors does vary, depending on the nature of the sensor. For example, a motion detector has a higher power requirement than a temperature sensor. In order to be able to power a wider range of devices, Ilika is increasing the energy footprint of its batteries. Increasing the amount of energy for a given active footprint can be achieved by utilising Ilika's patented stacking feature, which allows multiple cells to be stacked on top of one another. The sector most interested in larger capacity devices is the Industrial IoT and this sector accounts for about 25% of the value of the licensing pipeline.
· Large format. Solid-state batteries are of great interest to the automotive industry. Indeed, Ilika first started working on solid-state materials through its collaboration with Toyota, which commenced in 2008. Many automotive companies now have solid-state cells on their electric vehicle roadmap and Ilika has experienced a rising number of inbound enquiries on the possibility of scaling its technology to address the opportunity to use solid state as a motive power battery. This topic is discussed further below.
Stereax Development and Deployment Projects
Ilika has secured three development and deployment programmes with global OEM's:
Integrated energy harvester and battery
In December 2016, the company announced a two-year collaborative project with Sharp Laboratories of Europe (now known as Lightricity) to create an autonomous energy harvesting power source which will involve the integration of Ilika's solid state battery with Lightricity's photovoltaic (PV) technology creating the world's first fully integrated thin-film power source. This integration project is aligned with the development track for increasing the capacity of Stereax batteries.
Miniature Medical Implant
In March 2017, the company announced a two-year collaborative project with a well-financed bioelectronics company to develop a battery for miniature medical implants to provide treatments for serious health conditions, through the body's own nervous system. The programme is supported by Innovate UK and the Medical Research Council.
Wind turbine condition monitoring
In November 2017, Ilika announced a partnership to deploy Stereax powered devices for the condition monitoring of wind turbines with Titan Wind Energy, the largest manufacturer of wind turbines in China and the 4th largest globally.
Innovate UK Faraday Challenge
Innovate UK is expecting 50% of vehicle production by 2030 to be electric vehicles (EV) or plug-in hybrid vehicles (PHEV). In July 2017, the UK government announced a £246 million commitment over 4 years for automotive battery development, covering cell manufacture, modules, battery pack design and deployment in vehicles. In November 2017, this was followed with the announcement of an £80m National Battery Manufacturing Development Facility in Warwick. Innovate UK is administering a series of competitions, designed to promote battery innovation. In a post year end development in June 2018, Ilika announced that it has been offered £4.1m of grant funding to participate in collaborations with Honda, Ricardo, McLaren and A123 Batteries.
The development of large format cells will require Ilika to build a lower cost printing platform, suitable for printing bulk materials. This will involve establishing a pre-pilot line at its facility in Southampton. It is anticipated that a second stage of scale-up to a pilot line could be achieved in collaboration with the National Battery Facility. Ilika currently expects to use its licensing model to commercialise the large format cells in the same way it is bringing its miniature batteries to market.
Patent Position
Building Ilika's intellectual property portfolio in solid-state batteries has continued to be a focus this year. Three additional filings relating to solid-state batteries were made, covering electrolyte and electrode compositions as well as processing methods for singulating cells. In addition, three filings were made covering new superelastic and high-strength alloys from our self-healing alloy project. During the course of the year, three patents went to grant in the USA covering core-shell catalysts for fuel cells. These patents cover catalysts that are stable in the aggressive acidic environment of hydrogen fuel cells, while being active in the promotion of the chemical reactions necessary for converting hydrogen and oxygen into water. Ilika now maintains a portfolio of 22 patent families, comprising of 81 patents.
Materials Portfolio Activities
While the Company's strategy has been to focus the majority of its resources on developing and commercialising its solid-state battery technology, Ilika was also active in the development of other energy materials, aerospace alloys and materials for electronics applications using its high throughput platform.
Energy Materials
In August 2016, Ilika announced that it is taking part in a three-year project to develop protected anodes for lithium sulphur batteries, led by Johnson Matthey Plc. This project is developing an innovative protected lithium anode approach to discover new electrolyte composition options and fabricate a free-standing, lithium-containing protected anode/separator for integration into pouch cells. The novel protected anode will mitigate a commonly experienced problem in lithium-sulphur cells, the so-called polysulphide shuttle effect, leading to enhanced performance cells that can be made with existing cell fabrication methods. The pouch cells being developed in this project are high capacity, low cost batteries for large scale renewable energy storage and therefore address a distinct market segment to the applications for which Ilika's Stereax®batteries are designed. This project will complete in 2019.
In March 2017, Ilika announced a $1m, one year commercially-funded program with the Toyota Research Institute ('TRI') to develop game changing energy materials. The program is part of a $35 million investment by TRI over four years in research that uses artificial intelligence to accelerate the design and discovery of advanced materials. In this initial collaboration with the Company, Ilika's unique high throughput platform was used to make and test candidate materials, which were identified using simulation, machine learning and artificial intelligence strategies. Ilika has now completed the initial screening activities associated with this phase of the project. Promising materials will be further scaled-up by Toyota and its suppliers for deployment in its future low-emission vehicles.
Aerospace Alloys
Ilika has continued in its lead role in a £2.15m, three year Innovate UK grant funded project with BAE Systems, GKN, Reliance Precision Engineering and the University of Sheffield. The project started in September 2015 to develop a new generation of self-healing alloys suitable for additive manufacturing (AM) processes and to develop a metallic manufacturing process that takes advantage of the flexibility of AM and the precision of subtractive manufacturing. This will enable the manufacture of novel components with critical feature tolerances, meeting the challenges faced in the design of mechanisms for the aerospace industry with lower weight, structural integrity and functional performance. The programme has been productive in defining new alloy systems of interest and a series of patent filings have been made.
In January 2018, Ilika completed its role leading a three year Innovate UK funded project with Rolls Royce, Diamond Light Source and the University of Cambridge to develop new superalloy compositions for gas turbine engines with better thermo efficiency than current alloys. The alloys are designed to increase gas turbine performance, reducing CO2 emissions and noise levels at take-off.
Electronic Materials
Ilika has continued its collaboration with Seagate, developing materials and processes for Hard Disk Drive ('HDD') applications. The project is focussed on materials with superior nanophotonic properties to achieve improved hard drive performance and reliability. These materials must operate at temperatures of up to 300⁰C for thousands of hours, requiring extremely robust nanomaterials that have specific photonic properties allowing light energy to be conducted.
In March 2018, Ilika announced an 18-month collaboration with PragmatIC and Arm to further progress development of ultra-thin and flexible semiconductors for mass market applications. The principal objective is to deliver P-type metal-oxide semiconductor circuit technology to enhance PragmatIC's flexible integrated circuit designs. The first application is the smart packaging market which is predicted to grow at a CAGR of 8% to a projected value of $7.8billion by 2021.
Quality Management System
In January 2018, Ilika announced that its Quality Management System (QMS) for the development of solid-state batteries and materials research and development programmes has been assessed and found to meet the requirements of ISO 9001:2015 by DAS certification. ISO 9001 is the world's most widely recognised QMS and helps organisations to meet the expectations and needs of their customers. The certification promotes the development of continual improvement, customer satisfaction, traceability and international best practices. Ilika aims to provide clients with the highest quality services and the ISO certification means that clients can have increased confidence in the service provided. The certification is independently audited annually.
Key performance indicators ('KPIs')
The board considers that the most important KPIs are technical and operational and relate to the sales pipeline and engagement of commercialisation partners resulting from the progress of the technical development programmes outlined above.
The most important financial KPIs are the cash position and the operating loss of the Group, which remain under constant focus and which are considered in the financial review.
FINANCIAL REVIEW
The Financial Review should be read in conjunction with the consolidated financial statements of the Company and Ilika Technologies Limited (together the 'Group') and the notes thereto on pages 22 to 40. The consolidated financial statements are presented under International Financial Reporting Standards as adopted by the European Union. The financial statements of the Company continue to be prepared in accordance with International Financial Reporting Standards as adopted by the EU and are set out on pages 41 to 45.
Statement of Comprehensive Income
Revenues
Revenue, all from continuing activities, for the year ended 30th April 2018 was £2.1m (2017: £1.1m). This includes £1.3m of grant income recognised from nine projects that the company has in progress with Innovate UK (2017: £0.7m from six programmes). Details of the various programmes are provided in the Materials Portfolio activities on page 5.
More of the Company's activities are supported by grant or commercial funding than was the case in the prior year, where operational resources were more heavily devoted to the internally funded battery development programme.
Administrative expenses and losses for the period
Administrative costs for the year were slightly decreased at £3.8m in 2018 relative to £3.9m in 2017. This excludes the share-based payment charge.
Combined cost of sales and administrative expenses were £4.9m in the year which is up from the £4.4m for 2017 and is associated with the increased level of commercial and grant supported programmes.
2,173,210 Options lapsed in the year, of which 1,386,650 lapsed due to performance criteria. No reduction has been made in the share-based payment charge in respect of these lapsed options. 1,266,117 options were granted in the period.
The lower share-based payment charge together with the improved margin meant that loss on continuing activities before tax reduced from £3.9m in 2017 to £3.3m in 2018.
Statement of financial position and cash flows
At 30th April 2018, net assets amounted to £3.8m (2017: £6.2m), including net funds of £2.8m (2017: £5.4m).
The principal elements of the £2.6m decrease over the year ended 30 April 2018 in net funds were:
· Cash used in operations of £2.6m (2017: £3.2m);
· Purchase of plant, property and equipment of £0.3m (2017: £0.3m)
· Research and development tax credits received of £0.4m (2017: £0.4m);
PRINCIPAL RISKS AND UNCERTAINTIES
Commercial risk
The Group is subject to competition from competitors who may develop more advanced and less expensive alternative technology platforms, both for existing materials and for those materials currently under development. The Group is largely dependent on its partners to commercialise the end-products containing the Group's materials.
The Group seeks to reduce this risk by continually assessing competitive technologies and competitors. The Group seeks to commercialise materials through multiple channels to reduce overreliance on individual partners and, in agreements with partners, it ensures that there are commercialisation milestones which must be met for the partner to retain the rights to commercialise the materials.
Financial risk
The Group is reliant on a small number of significant customers and partners. Termination of these agreements could have a material adverse effect on the Group's results or operations or financial condition. The Group expects to incur further operating losses as progress on development programmes continue.
The Group seeks to reduce this risk by broadening the number of customers and partners and thereby reduce reliance on individual significant companies. The Group applies for Research and Development tax credits to help mitigate its investment in these activities.
Intellectual property risk
The Group faces the risk that intellectual property rights necessary to exploit research and development efforts may not be adequately secured or defended. The Group's intellectual property may also become obsolete before the products and services can be fully commercialised.
The Group seeks to reduce this risk by employing in-house staff with extensive global experience of patenting and licensing using commercially available patent searching and landscaping software. External patent agents and attorneys are used to advise on the drafting and filing of patent applications.
Dependence on senior management and key staff
Certain members of staff are considered vital to the successful development of the business. Failure to continue to attract and retain such highly skilled individuals could adversely affect operational results.
The Group seeks to reduce this risk by offering appropriate incentives to staff through competitive salary packages and participation in long-term share option schemes.
Brexit risk
The Group has reviewed the potential impact of Brexit on the risks identified above and believes that whilst intellectual property risk will remain largely unaffected, there may be an impact in the future regarding the Group's ability to attract and retain highly skilled individuals.
The Group is alert to and continuously reviewing this potential risk and formulating its response at the appropriate time.
By order of the Board
Mike Inglis Graeme Purdy
Chairman CEO
10th July 2018
ILIKA plc
Financial Statements for year ended 30th April 2018
DIRECTORS' REPORT
Directors
The Directors who served on the board of Ilika during the year and to the date of this report were as follows:
Executive
Mr S Boydell (FD and Company Secretary)
Prof. B. E. Hayden (CSO)
Mr G. Purdy (CEO)
Non-Executive
Mr M. Inglis (Chairman)
Ms. C Spottiswoode CBE
Prof. Sir W Wakeham (Senior Independent Director)
Prof. K Jackson
Research and development costs
In accordance with the policy outlined in note 1, the Group incurred research and development expenditure of £2,009,023 in the year (2017: £2,110,843). Commentary on the major activities is given in the Strategic Report.
Financial instruments
The use of financial instruments and financial risk management policies is covered in the Strategic Report and also in note 13 of the financial statements.
Future developments
Information on the future developments of the business are included in the Strategic Report on page 2
Dividends
The Directors do not recommend the payment of a dividend.
Directors' interests in ordinary shares
The directors, who held office at 30th April 2018, had the following interests in the ordinary shares of the Company:
| Number of shares | ||
| 1st May 2017 | 30th April 2018 | |
| G Purdy | 609,427 | 609,427 |
| C Spottiswoode | 45,454 | 45,454 |
| S Boydell | 9,090 | 9,090 |
| M Inglis | 115,000 | 115,000 |
| W Wakeham | 20,000 | 20,000 |
| K Jackson | 20,000 | 20,000 |
| B Hayden* | - | - |
* B Hayden had an interest in preference shares of the Company amounting to 426,300 at 1st May 2017 and at 30th April 2018.
Between 30th April 2018 and the date of this report, there has been no change in the interests of directors in shares as disclosed in this report.
Substantial shareholdings
On 2nd July 2018 the Company had been notified of the following holdings of more than 3% or more of the issued share capital of the Company.
| Shareholder | No. of ordinary shares | % shareholding |
| Sapia Partners | 11,374,800 | 14.5 |
| Henderson Global | 11,300,000 | 14.4 |
| Hargreave Hale | 8,326,220 | 10.6 |
| Parkwalk Advisors | 5,300,000 | 6.8 |
| Charles Stanley Group plc | 4,763,216 | 6.1 |
| Baillie Gifford & Co. | 4,643,978 | 5.9 |
| Southampton Asset Management | 2,349,900 | 3.0 |
Post balance sheet events
There are no significant post balance sheet events from the 30th April 2018 to the signing of this report.
Auditors
All the current directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company's Auditors for the purposes of their audit and to establish that the Auditors are aware of that information. The Directors are not aware of any relevant audit information of which the Auditors are unaware.
A resolution to re-appoint BDO LLP will be proposed at the next Annual General Meeting.
By order of the board
Steve Boydell
Company Secretary
ILIKA plc
Financial Statements for year ended 30th April 2018
DIRECTORS' REMUNERATION REPORT
Remuneration Committee
The Group's remuneration policy is the responsibility of the Remuneration Committee (the 'Committee'). The terms of reference of the Committee are outlined in the Corporate Governance Statement on page 15. The Committee members are Mike Inglis (Chairman), Clare Spottiswoode, Prof Keith Jackson and Prof Sir William Wakeham, all of whom are independent non-executive directors.
The Chief Executive Officer and certain executives may be invited to attend Committee meetings to assist with its deliberations, but no executive is present when their own remuneration is being discussed.
Remuneration policy
(i) Executive remuneration
The Committee has a duty to establish a remuneration policy which will enable it to attract and retain individuals of the highest calibre to run the Group. Its policy is to ensure that the executive remuneration packages of executive directors and the fee of the Chairman are appropriate given performance, scale of responsibility, experience, and consideration of the remuneration packages for similar executive positions in companies it considers to be comparable. Packages are structured to motivate executives to achieve the highest level of performance in line with the best interests of shareholders. A significant proportion of the total remuneration package, in the form of bonus and share options, is performance driven and has been constructed following consultation with major shareholders.
Components of remuneration
| Component | Purpose and link to strategy | Operation | Performance metrics |
| Base salary | To attract and retain talent. | Reflecting individual's role, experience and performance. Base salaries are reviewed annually in January. | Take into account Group and individual performance, external benchmark information and internal relativities |
| Benefits and Pension | To offer market competitive package | Contribution to the executive director's individual money purchase scheme (at between 8% and 10% of base salary) and critical illness cover | n/a |
| Short‑Term Incentive Plan - annual performance related bonus |
Rewards the achievement of short‑term financial and strategic project milestones | Maximum bonus of base salary: 100% CEO, 60% CSO and 40% CFO. 50% of the bonus is payable in cash and 50% is deferred into shares (using nominal cost options) for one year, subject to continued employment | Delivery of exceptional performance against a series of financial, commercial and technology objectives. |
| Long‑Term Incentive Plan - restricted share unit awards | Incentivise, retain and reward the executive directors for successfully taking the Company through the next stage of its growth. | Ilika plc Long Term Incentive Plan 2015 (the "LTIP"), was adopted by shareholders at the 2015 AGM Single awards of share options with an exercise price of the nominal value of the shares were made which will vest after three years |
Awards vest to the extent that challenging share price targets have been met. |
| Shareholding guidelines | To increase shareholder alignment | 100% of the net of tax share awards which vest must be retained until the following guidelines are met: CEO 300% of salary CSO 250% of salary CFO 150% of salary |
n/a |
(ii) Chairman and non-executive Director remuneration
The Chairman, Mr Inglis receives a fixed fee of £65,975 per annum. Clare Spottiswoode, Prof Sir William Wakeham and Prof Keith Jackson received a fixed fee of £32,988 per annum. The fixed fee covers preparation for and attendance at meetings of the full Board and committees thereof. The Chairman and the executive directors are responsible for setting the level of non-executive remuneration. The non-executive directors are also reimbursed for all reasonable expenses incurred in attending meetings.
All remuneration policies will be reviewed regularly to maintain adherence with best market practice as appropriate.
Directors' remuneration
The aggregate remuneration received by directors who served during the year ended 30th April 2018 and 30th April 2017 was as follows:
| Basic salary |
Benefits in kind | Bonus | Total Short term benefits |
Pension | Total | |
|---|---|---|---|---|---|---|
| £ | £ | £ | £ | £ | £ | |
| --- | --- | --- | --- | --- | --- | --- |
| Year to 30th April 2018 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| G Purdy | 193,000 | 622 | 25,502 | 219,124 | 30,300 | 249,424 |
| S Boydell | 125,405 | 405 | 6,630 | 132,440 | 17,592 | 150,032 |
| B Hayden* | 64,960 | - | 8,144 | 73,104 | - | 73,104 |
| M Inglis | 65,975 | - | - | 65,975 | - | 65,975 |
| K Jackson | 32,988 | - | - | 32,988 | - | 32,988 |
| W Wakeham | 32,988 | - | - | 32,988 | - | 32,988 |
| C Spottiswoode | 32,988 | - | - | 32,988 | - | 32,988 |
| ------ | ------ | ------ | ------ | ------ | ------ | |
| 548,304 | 1,027 | 40,276 | 589,607 | 47,892 | 637,499 | |
| ------ | ------ | ------ | ------ | ------ | ------ | |
| Year to 30th April 2017 | ||||||
| G Purdy | 191,000 | 615 | 50,250 | 241,865 | 30,100 | 271,965 |
| S Boydell | 123,429 | 399 | 13,043 | 136,871 | 17,434 | 154,305 |
| B Hayden* | 64,320 | - | 19,372 | 83,692 | - | 83,692 |
| M Inglis | 65,325 | - | - | 65,325 | - | 65,325 |
| J Boyer | 32,662 | - | - | 32,662 | - | 32,662 |
| K Jackson | 32,662 | - | - | 32,662 | - | 32,662 |
| W Wakeham | 32,662 | - | - | 32,662 | - | 32,662 |
| C Spottiswoode | ------ | ------ | ------ | ------ | ------ | ------ |
| 542,060 | 1,014 | 82,665 | 625,739 | 47,534 | 673,273 | |
| ------ | ------ | ------ | ------ | ------ | ------ |
*B Hayden is employed by the University of Southampton. The amounts disclosed in the table above relate to payments made directly to B Hayden. The University of Southampton recharged employment costs of £68,544 to the company in the year in respect of B Hayden. (2017: £67,313).
Benefits in kind include critical illness cover.
Share options
The share options of the directors are set out below:
| Unapproved | 2017 Number |
2018 Number |
Exercise Price | Expiry date | Performance Conditions |
|---|---|---|---|---|---|
| G Purdy1 | 136,200 | - | 80p | July 2017 | n/a |
| --- | --- | --- | --- | --- | --- |
| G Purdy | 1,050,000 | 1,050,000 | 51p | May 2020 | n/a |
| --- | --- | --- | --- | --- | --- |
| G Purdy2 | 872,727 | 872,727 | 1p | September 2025 | See note 4 |
| --- | --- | --- | --- | --- | --- |
| G Purdy | - | 145,810 | 1p | August 2027 | n/a |
| B Hayden1 | 59,300 | - | 80p | July 2017 | n/a |
| B Hayden | 525,000 | 525,000 | 51p | May 2020 | n/a |
| B Hayden1 | 177,900 | - | 81.5p | - | See note 4 |
| B Hayden2 | 527,272 | 527,272 | 1p | September 2025 | See note 4 |
| B Hayden | - | 56,211 | 1p | August 2027 | n/a |
| S Boydell | 117,600 | 117,600 | 51p | May 2020 | n/a |
| S Boydell2 | 274,909 | 274,909 | 1p | September 2025 | See note 4 |
| S Boydell | - | 37,846 | 1p | August 2027 | n/a |
| W Wakeham | 65,100 | 65,100 | 51p | May 2020 | n/a |
| C Spottiswoode | 50,100 | 50,100 | 51p | May 2020 | n/a |
| M Inglis3 | 120,000 | 120,000 | 68.75p | September 2025 | See note 4 |
| K Jackson3 | 40,000 | 40,000 | 68.75p | September 2025 | See note 4 |
| Approved | |||||
| G Purdy1 | 26,500 | - | 80p | May 2017 | n/a |
| G Purdy1 | 245,300 | - | 81.5p | - | See note 4 |
| S Boydell | 90,000 | 90,000 | 80p | December 2019 | n/a |
| S Boydell1 | 154,600 | - | 81.5p | - | See note 4 |
1) Share options lapsed in the year.
2) Shareholders' approval to adopt and establish the Ilika plc Long Term Incentive Plan 2015 (the "LTIP") was received at the AGM in September 2015.
3) Shareholders' approval to grant unapproved share options to the non-executive directors Mike Inglis and Professor Keith Jackson was received at the AGM in September 2015.
4) These awards will vest on the achievement of the following share price targets, assessed over a three year performance period:
(a) Less than 50% growth in share price - no vesting
(b) 50% growth in share price - 25% of the shares subject to award will vest
(c) 100% growth in share price - 75% of the shares subject to award will vest
(d) 200% growth in share price - 100% of the shares subject to award will vest
Awards will vest between points (b) and (c) and between (c) and (d) on a straight-line basis.
Share based payment charge attributable to directors in the year was £409,502 (2017: £428,587).
During the year, the committee received independent advice on executive remuneration matters from FIT Remuneration Consultants LLP. FIT received £7,380 in fees for these services.
Mike Inglis
Chairman of the Remuneration Committee
Statement of Directors' responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market ('AIM').
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
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 requirements of 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.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Going concern
The directors have prepared and reviewed financial forecasts. After due consideration of these forecasts and current cash resources, the directors consider that the Company and the Group have adequate financial resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date of this report), and for this reason the financial statements have been prepared on a going concern basis. Following the signing of the financial statements the directors anticipate raising additional funds from the issue of shares to assist in the financing of the group's operations.
By order of the Board
Graeme Purdy
Chief Executive
10th July 2018
ILIKA plc
Financial Statements for year ended 30th April 2018
CORPORATE GOVERNANCE STATEMENT
We note that the AIM rules are due to be updated, which is proposed to take effect from 30 June 2018, to require a statement as to how we comply with a recognised corporate governance code. The directors intend that the group will comply with the provisions of the Quoted Companies Alliance Corporate Governance Code, insofar as they are appropriate given its size, nature and stage of development.
Board of directors
The Board of directors (the 'Board') consists of a Non-Executive Chairman, three Executive Directors and three Non-Executive Directors.
The responsibilities of the Non-Executive Chairman and the Chief Executive Officer are clearly divided. The Chairman is responsible for overseeing the formulation of the overall strategy of the company, the running of the board, ensuring that no individual or group dominates the Board's decision making and ensuring that the non-executive directors are properly briefed on matters. Prior to each Board meeting, directors are sent an agenda and Board papers for each agenda item to be discussed. Additional information is provided when requested by the Board or individual directors.
The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day to day business activities of the Group through his chairmanship of the executive committee.
The Non-Executive Directors bring relevant experience from different backgrounds and receive a fixed fee for their services and reimbursement of reasonable expenses incurred in attending meetings.
The Board retains full and effective control of the Group. This includes responsibility for determining the Group's strategy and for approving budgets and business plans to fulfil this strategy. The full Board ordinarily meets bi-monthly.
The Company Secretary is responsible to the Board for ensuring that Board procedures are followed and that the applicable rules and regulations are complied with. All directors have access to the advice and services of the Company Secretary, and independent professional advice, if required, at the Company's expense. Removal of the Company Secretary would be a matter for the Board.
Performance evaluation
The Board has a process for evaluation of its own performance which is carried out annually.
Board Committees
As appropriate, the Board has delegated certain responsibilities to Board Committees as follows:
i) Audit Committee
The Audit Committee currently comprises Clare Spottiswoode CBE (Chairman), Professor Sir William Wakeham (Senior Independent Director), Professor Keith Jackson and Mike Inglis.
The Committee monitors the integrity of the Group's financial statements and the effectiveness of the audit process. The Committee reviews accounting policies and material accounting judgements. The Committee also reviews, and reports on, reports from the Group's auditors relating to the Group's accounting controls. It makes recommendations to the Board on the appointment of auditors and the audit fee. It has unrestricted access to the Group's auditors. The Committee keeps under review the nature and extent of non-audit services provided by the external auditors in order to ensure that objectivity and independence are maintained.
ii) Remuneration Committee
The Remuneration Committee comprised Mike Inglis (Chairman), Clare Spottiswoode CBE Professor Keith Jackson and Professor Sir William Wakeham (Senior Independent Director).
The committee is responsible for making recommendations to the Board on remuneration policy for Executive Directors and the terms of their service contracts, with the aim of ensuring that their remuneration, including any share options and other awards, is based on their own performance and that of the Group generally.
iii) Nomination Committee
The Nomination Committee comprised Mike Inglis (Chairman), Professor Sir William Wakeham (Senior Independent Director), Professor Keith Jackson and Clare Spottiswoode CBE.
It is responsible for providing a formal, rigorous and transparent procedure for the appointment of new directors to the board and reviewing the performance of the board each year.
Attendance at Board meetings and committees
The Directors attended the following Board and committees meetings during the year:
| Attendance | Board | Audit | Nomination | Remuneration |
| Mr S. Boydell | 6/6 | - | - | - |
| Prof. B. E. Hayden | 6/6 | - | - | - |
| Mr M Inglis | 6/6 | 2/2 | 1/1 | 2/2 |
| Mr G. Purdy | 6/6 | - | - | - |
| Ms. C Spottiswoode | 5/6 | 2/2 | 1/1 | 2/2 |
| Prof. Sir W Wakeham | 6/6 | 2/2 | 1/1 | 2/2 |
| Prof K Jackson | 6/6 | 2/2 | 1/1 | 2/2 |
Risk management and internal control
The Board is responsible for the systems of internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. The Audit Committee reviews the effectiveness of these systems primarily by discussion with the external auditor and by considering the risks potentially affecting the Group.
The Group does not consider it necessary to have an internal audit function due to the small size of the administration function. Instead there is a detailed Director review and authorisation of transactions. The annual audit by the Group auditor, which tests a sample of transactions, did not highlight any significant system improvements in order to reduce risk.
The Group maintains appropriate insurance cover in respect of actions taken against the Executive Directors because of their roles, as well as against material loss or claims of the Group. The insured values and type of cover are comprehensively reviewed on a periodic basis.
By order of the Board
Mike Inglis
Chairman
10th July 2018
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ILIKA PLC
Opinion
We have audited the financial statements of Ilika plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2018 which comprise the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated cash flow statement, the Consolidated statement of changes in equity, the Company balance sheet, the Company cash flow statement, the Company statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 30 April 2018 and of the group's loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
| Key audit matter | How we addressed the matter |
| Impacting the group financial statements | |
| We have determined that there are no key audit matters to communicate in our report that relate to the group financial statements. | |
| Impacting the parent financial statements only | |
| Investment in subsidiary As set out in note 21 the Company holds an investment of £24.2m in its subsidiary, Ilika Technologies Limited. At each reporting date, management carries out an impairment review in accordance which includes assessing future cashflows and discounting to present value and comparing this to its carrying amount. The risk is in the estimation of future cashflows and applying an appropriate discount rate to arrive at the present value. |
We have tested the integrity of the client's model and challenged the impairment review through assessing the appropriateness of the key assumptions such as the discount rate, the scale of market opportunities and risk weighting of estimated future cashflows to available market information when they are fully commercialised. We have re-performed the calculation of management's discounted cashflow workings. |
Our application of materiality
Group materiality: £156,000 (2017: £183,000).
Parent company materiality: £148,000 (2017: £173,000).
Our group materiality, for both the current and prior year, has been based upon 5% of the loss before tax. We consider the loss before tax to be one of the principal considerations for stakeholders in assessing the performance of the group.
Materiality in respect of the audit of the Parent Company has been set using a benchmark of 1% of total assets for both the current and prior year. We consider total assets to be the most appropriate measure for the basis of materiality as the company is a holding company.
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Performance materiality was set at £117,000. In setting the level of performance materiality we considered a number of factors including the expected total value of known and likely misstatements based on past experience and other factors.
Materiality for the trading subsidiary of the group was set at a lower level that that of the group at £148,000 (2016 - £173,000).
We agreed with the audit committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of £3,120 (2017: £3,660). We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The scope of our group audit was established by obtaining an understanding of the group, including its control environment, and assessing the risks of material misstatement.
Both components, Ilika plc and Ilika Technologies Limited, are considered significant components and are subject to a full-scope audits by BDO LLP.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• 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
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on page 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton
United Kingdom
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
| Year ended 30th April | |||
| Notes | 2018 | 2017 | |
| £ | £ | ||
| Turnover | 2 | 2,051,177 | 1,050,667 |
| Revenue | 798,430 | 311,946 | |
| UK grants | 1,252,747 | 738,721 | |
| Cost of sales | (1,090,898) | (574,272) | |
| ------- | ------- | ||
| Gross profit | 960,279 | 476,395 | |
| Total Administrative expenses | |||
| Administrative expenses | (3,793,686) | (3,863,411) | |
| Share based payment charge | (434,382) | (547,347) | |
| 4,228,068 | 4,410,758 | ||
| ------- | ------- | ||
| Operating loss | 3 | (3,267,789) | (3,934,363) |
| Income from short term deposits | 17,156 | 23,844 | |
| ------- | ------- | ||
| Loss before tax | (3,250,633) | (3,910,519) | |
| Taxation | 5 | 353,309 | 370,274 |
| ------- | ------- | ||
| Loss for period / total comprehensive income attributable to owners of parent | (2,897,324) | (3,540,245) | |
| ------- | ------- | ||
| Loss per share from continuing operations | 6 | ||
| Basic | (3.67)p | (4.84)p | |
| Diluted | (3.67)p | (4.84)p | |
Consolidated balance sheet
Company number 7187804
| As at 30th April | |||
| Notes | 2018 | 2017 | |
| £ | £ | ||
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 7 | 2,453 | 2,581 |
| Property, plant and equipment | 8 | 578,103 | 451,560 |
| ------- | ------- | ||
| Total non-current assets | 580,556 | 454,141 | |
| ------- | ------- | ||
| Current assets | |||
| Trade and other receivables | 9 | 1,024,359 | 1,116,367 |
| Current tax receivable | 5 | 330,000 | 330,000 |
| Other financial assets - bank deposits | - | 2,900,000 | |
| Cash and cash equivalents | 10 | 2,811,155 | 2,510,884 |
| ------- | ------- | ||
| Total current assets | 4,165,514 | 6,857,251 | |
| ------- | ------- | ||
| Total assets | 4,746,070 | 7,311,392 | |
| ------- | ------- | ||
| Issued capital and reserves attributable to owners of parent | |||
| Issued share capital | 14 | 789,911 | 789,911 |
| Share premium | 23,179,756 | 23,179,756 | |
| Capital restructuring reserve | 6,486,077 | 6,486,077 | |
| Retained earnings | (26,669,347) | (24,206,405) | |
| ------- | ------- | ||
| Total equity | 3,786,397 | 6,249,339 | |
| ------- | ------- | ||
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 11 | 809,673 | 912,053 |
| Provisions | 12 | 150,000 | 150,000 |
| ------- | ------- | ||
| Total liabilities | 959,673 | 1,062,053 | |
| ------- | ------- | ||
| Total equity and liabilities | 4,746,070 | 7,311,392 | |
| ------- | ------- |
The notes on pages 26 to 40 form part of these financial statements
These financial statements were approved and authorised for issue by the Board of Directors on 10th July 2018.
Mr. M Inglis
Chairman
Consolidated cash flow statement
| Year ended 30th April | ||||
| 2018 | 2017 | |||
| £ | £ | |||
| Cash flows from operating activities | ||||
| Loss before taxation | (3,250,633) | (3,910,519) | ||
| Adjustments for: | ||||
| Amortisation | 3,282 | 13,014 | ||
| Depreciation | 196,415 | 192,331 | ||
| Equity settled share-based payments | 434,382 | 547,347 | ||
| (Profit)/ loss on disposal of plant, property and equipment | - | (30,783) | ||
| Financial income | (17,156) | (23,844) | ||
| ------- | ------- | |||
| Operating cash flow before changes in working capital, interest and taxes | (2,633,710) | (3,212,454) | ||
| Decrease/(increase) in trade and other receivables | 92,008 | (598,672) | ||
| (Decrease) / increase in trade and other payables | (102,380) | 163,925 | ||
| ------- | ------- | |||
| Cash utilised by operations | (2,644,082) | (3,647,201) | ||
| Tax received | 353,309 | 415,274 | ||
| ------- | ------- | |||
| Net cash flow used in operating activities | (2,290,773) | (3,231,927) | ||
| Cash flows from investing activities | ||||
| Interest received | 17,156 | 23,844 | ||
| Sale of property plant and equipment | - | 40,129 | ||
| Purchase of intangible assets | (3,154) | |||
| Purchase of property, plant and equipment | (322,958) | (253,913) | ||
| (Increase)/ decrease in other financial assets | 2,900,000 | (2,900,000) | ||
| ------- | ------- | |||
| Net cash from / (used in) investing activities | 2,591,044 | (3,089,940) | ||
| Cash flows from financing activities | ||||
| Proceeds from issuance of ordinary share capital | - | 6,300,000 | ||
| Cost of share issue | - | (464,661) | ||
| ------- | ------- | |||
| Net cash from financing activities | - | 5,835,339 | ||
| ------- | ------- | |||
| Net decrease in cash and cash equivalents | 300,271 | (486,528) | ||
| Cash and cash equivalents at the start of the period | 2,510,884 | 2,997,412 | ||
| ------- | ------- | |||
| Cash and cash equivalents at the end of the period | 2,811,155 | 2,510,884 | ||
| ------- | ------- | |||
Consolidated statement of changes in equity
| Share capital |
Share premium account |
Capital restructuring reserve |
Retained earnings | Total attributable to equity holders of parent |
|
|---|---|---|---|---|---|
| £ | £ | £ | £ | £ | |
| --- | --- | --- | --- | --- | --- |
| --- | --- | --- | --- | --- | --- |
| As at 30th April 2016 | 663,911 | 17,470,417 | 6,486,077 | (21,213,507) | 3,406,898 |
| Share-based payment | - | - | - | 547,347 | 547,347 |
| Issue of shares | 126,000 | 6,174,000 | - | - | 6,300,000 |
| Cost of share issue | - | (464,661) | - | - | (464,661) |
| Loss and total comprehensive income | - | - | - | (3,540,245) | (3,540,245) |
| ------ | ------- | -------- | -------- | -------- | |
| As at 30th April 2017 | 789,911 | 23,179,756 | 6,486,077 | (24,206,405) | 6,249,339 |
| Share-based payment | - | - | - | 434,382 | 434,382 |
| Loss and total comprehensive income | - | - | - | (2,897,324) | (2,897,324) |
| ------ | ------- | -------- | -------- | -------- | |
| As at 30th April 2018 | 789,911 | 23,179,756 | 6,486,077 | (26,669,347) | 3,786,397 |
| ------ | ------- | -------- | -------- | -------- |
Share capital
The share capital represents the nominal value of the equity shares in issue.
Share premium account
When shares are issued, any premium paid above the nominal value is credited to the share premium reserve.
Capital restructuring reserve
The capital restructuring reserve arises on the accounting for the share for share exchange. It represents the difference between the value of the issued equity instruments of Ilika Technologies Limited immediately before the share for share exchange and the equity instruments of Ilika plc along with the shares issued to effect the share for share exchange.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Group since inception of the business.
Notes to the consolidated financial statements
1. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") adopted by the European Union. The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all of the years presented.
The individual financial statements of Ilika plc are shown on page 41 to 45.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to the reporting date. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns over the investee, and the ability of the investee to use its power to affect the variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Going concern
The financial statements have been prepared on a going concern basis which assumes that the Company will have sufficient funds available to enable it to continue to trade for the foreseeable future. In making their assessment that this assumption is correct the Directors have undertaken an in depth review of the business, its current prospects, and cash resources as set out below.
The directors have prepared and reviewed financial forecasts. The Group meets its day to day working capital requirements through existing cash resources which, at 30th April 2018, amounted to £2,811,155. After due consideration of these forecasts and current cash resources, the directors consider that the Company and the Group have adequate financial resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date of this report), and for this reason the financial statements have been prepared on a going concern basis.
The Directors have also considered the likely sales, contracts and announcements that the Company anticipate being able to make over the coming months, the current share price, levels of trading in the Company's shares and past history of raising funds with the Company's Brokers.
After taking account of all the above factors the Directors believe that as the market becomes more aware of the Company' prospects and the scale of the opportunities that the Company's technologies create the Company will continue to be able to raise any funds required to enable it to continue to trade and grow towards self-sufficiency.
Changes in accounting policies
(a) New standards, amendments to standards or interpretations adopted early
During the period ended 30th April 2018, there were no new or revised standards, amendments to standards or interpretations that have been adopted and affected the amounts reported in the financial statements.
(b) New standards, amendments to standards or interpretations not yet applied
The following standards, interpretations and amendments, which have not been applied in these financial statements and have an effective date commencing after 1st May 2018, will or may have an effect on the Group's future financial statements:
| International Accounting Standards (IAS/IFRS) | Effective date for periods commencing |
|
| IFRS 15 | Revenue from Contracts with Customers | 1 January 2018 |
The directors will assess the impact of IFRS 15, with particular focus on the recognition of revenue over the life of contracts and projects.
No other new standards or amendments are expected to have an effect on the Group.
Turnover
Turnover comprises the fair value for the sale of services, net of value added tax and is recognised as follows:
Sales of services
Sales of research and development services are recognised in the accounting period in which the services are rendered, by reference to the actual service provided as a proportion of the total services to be provided.
Government grants
Grants that compensate the Group for expenses incurred are recognised in the income statement on a systematic basis in the same periods in which the expenses are recognised.
Financial income
Income from short term deposits is recognised in the income statement as it accrues, using the effective interest method.
Pension and other post-retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Share-based payment transactions
The Group issues equity-settled share options to all employees. Equity-settled share options are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
The fair value of non market-based options granted by the Group is measured by use of the Black-Scholes pricing model taking into account the following inputs: the exercise price of the option; the life of the option; the market price on the date of grant of the option; the expected volatility of the share price; the dividends expected on the shares; and the risk free interest rate for the life of the option. 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.
Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as intangible assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if, an entity within the Group can demonstrate all of the following:
i. Its ability to measure reliably the expenditure attributable to the asset under development;
ii. The product or process is technically and commercially feasible;
iii. Its future economic benefits are probable;
iv. Its ability to use or sell the developed asset;
v. The availability of adequate technical, financial and other resources to complete the asset under development; and
vi. Its intention is to use or sell the developed asset.
Prior to and during the year ended 30th April 2018, no development expenditure satisfied all of these conditions.
Taxation
Companies within the group may be entitled to claim special tax allowances in relation to qualifying research and development expenditure (eg R&D tax credits). The group accounts for such allowances as tax credits, which means that they are recognised when it is probable that the benefit will flow to the group and that benefit can be reliably measured. R&D tax credits reduce current tax expense and, to the extent the amounts due in respect of them are not settled by the balance sheet date, reduce current tax payable. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment less their estimated residual value. The estimated useful lives are as follows:
| Leasehold improvements | lease term |
| Plant, machinery and equipment | 3 - 5 years |
| Fixtures & fittings | 3 - 5 years |
Impairment
The carrying amounts of the Group's assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated at the present value of the future expected cashflows associated with the impaired asset.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit or loss.
Intangible assets
Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised to administrative expenses using the straight line method over their estimated useful lives (1-3 years).
Intellectual property
Acquired intellectual property is included at cost and is amortised to administrative expenses on a straight-line basis over its useful economic life of 15 years.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group's financial assets are all classified as loans and receivables and carried at amortised cost. The Group's financial liabilities are all classified as 'other' liabilities which are carried at amortised cost. Cash and cash equivalents comprise cash balances and call deposits. Deposits of over 3 months' maturity, judged at inception, are classified as Other Financial Assets.
Key sources of estimation and uncertainty
The preparation of the Group's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses at the date of the Group's financial statements. The Group's estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The directors do not believe there to be any estimates or judgements that have a significant impact on the Group's Financial statements.
2. Segment reporting
The Group operates in one area of activity, namely the production, design and development of high throughput methods of material synthesis, characterisation and screening. The Group has materials development programmes addressing a wide range of applications including the solid state battery, aerospace alloys and electronic materials.
For management purposes, the Group is analysed by the geographical location of its customer base and business development directors have been appointed to cover the group's three territories of focus, Asia, North America and Europe.
| Year ended 30th April | ||
| Revenue | 2018 | 2017 |
| £ | £ | |
| Analysis by geographical market: | ||
| By destination | ||
| Asia | 38,241 | 21,280 |
| Europe | 134,302 | - |
| North America | 565,887 | 197,818 |
| UK | 1,312,747 | 831,569 |
| ------ | ------ | |
| 2,051,177 | 1,050,667 | |
| ------- | ------- | |
A number of customers individually account for more than 10% of the total turnover of the Group. The revenues from these companies are indicated below:
| Year ended 30th April | ||
| Revenue | 2018 | 2017 |
| £ | £ | |
| UK Grants | 1,252,747 | 738,721 |
| Customer 1 | 565,887 | 197,819 |
| Customers less than 10% | 232,543 | 114,127 |
| ------- | ------- | |
| 2,051,177 | 1,050,667 | |
| ------- | ------- |
3. Operating loss
| Year ended 30th April | ||
| 2018 | 2017 | |
| This is arrived at after charging: | £ | £ |
| Research and development expenditure in the year | 2,009,023 | 2,110,843 |
| Depreciation | 196,415 | 192,331 |
| Amortisation of intangible assets | 3,282 | 13,014 |
| Auditors remuneration: Fees payable to the Group's auditor for the audit of the Group's accounts |
22,200 | 20,700 |
| Fees payable to the Group's auditor for other services: - The Audit of the Group's subsidiaries |
6,800 | 6,800 |
| Operating lease rentals | 207,511 | 207,511 |
| Share-based payment | 434,382 | 547,347 |
| ------- | ------- |
4. Employees
The average number of employees during the year, including executive directors, was:
| Year ended 30th April | ||
| 2018 | 2017 | |
| Number | Number | |
| Administration | 6 | 6 |
| Materials synthesis | 34 | 32 |
| ------ | ------ | |
| 40 | 38 | |
| ------ | ------ |
Staff costs for all employees, including executive directors, consist of:
| Year ended 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Wages and salaries | 2,055,959 | 1,954,655 |
| Social security costs | 225,480 | 215,648 |
| Share-based payment expense | 434,382 | 532,347 |
| Pension costs | 150,120 | 139,286 |
| ------- | ------- | |
| 2,865,941 | 2,841,936 | |
| -------- | -------- |
| The total remuneration of the Directors of the Group was as follows: | ||
| Year ended 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Wages and salaries | 589,607 | 624,726 |
| Pension costs | 47,892 | 47,534 |
| ------- | ------- | |
| Directors' emoluments | 637,499 | 672,260 |
| Social security costs | 75,072 | 80,177 |
| Share-based payment expense | 409,502 | 428,587 |
| ------- | ------- | |
| Key management personnel | 1,122,073 | 1,181,024 |
| -------- | -------- |
The Directors represent key management personnel and further details are given in the Directors' Remuneration Report on pages 11 to 13.
5. Taxation
(a) Tax on loss from ordinary activities
There is no taxation charge due to the losses incurred by the Group during the year. The taxation credit represents R&D tax credit claims as follows:
| Year ended 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Current tax on loss for the year | 330,000 | 330,000 |
| Adjustments to prior period | 23,309 | 40,274 |
| ------ | ------ | |
| 353,309 | 370,274 | |
| ------ | ------ |
(b) Factors affecting current tax charge
The tax assessed on the loss on ordinary activities for the period is different to the standard rate of corporation tax in the UK of 19% (2017: 20%). The differences are reconciled below:
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Loss on ordinary activities before tax | (3,120,313) | (3,910,519) |
| ------ | ------ | |
| Loss on ordinary activities before tax multiplied by the standard rate of corporation tax in the UK of 19% (2017: 20%) | (592,859) | (778,975) |
| Effects of: | ||
| Expenses not deductible for corporation tax | 57,772 | 109,098 |
| R&D relief | (330,000) | (289,726) |
| Origination of unrecognised tax losses | 535,087 | 629,603 |
| Under provision in previous years | (23,309) | (40,274) |
| ------ | ------ | |
| Total tax credit for the year | (353,309) | (370,274) |
| ------ | ------ |
Unrecognised deferred taxation
There are tax losses available for carry forward against future trading profits of approximately £21,529,000 (2017: £19,065,000). A deferred tax asset in respect of these losses of approximately £3,660,000 (2017: £3,240,000) has not been recognised in the accounts, as the full utilisation of these losses in the foreseeable future is uncertain.
6. Loss per share
Earnings per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue and the earnings, being loss after tax, are as follows:
| Year ended 30th April | ||
| 2018 | 2017 | |
| No. | No. | |
| Weighted average number of equity shares | 78,991,110 | 73,122,617 |
| -------- | -------- | |
| £ | £ | |
| Earnings, being loss after tax | (2,897,324) | (3,540,245) |
| -------- | -------- | |
| Pence | Pence | |
| Loss per share | (3.67) | (4.84) |
| ------ | ------ |
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive. At 30th April 2018, there were 6,727,499 options outstanding (2017: 7,741,892) as detailed in notes 14 and 18.
Notes to the consolidated financial statements
7. Intangible assets
| Software licences |
Intellectual property | Total | ||
|---|---|---|---|---|
| £ | £ | £ | ||
| --- | --- | --- | --- | --- |
| Cost | ||||
| As at 30th April 2016 | 46,293 | 75,000 | 121,293 | |
| Disposals | (7,250) | (7,250) | ||
| ------ | ------ | ------ | ||
| As at 30th April 2017 | 39,043 | 75,000 | 114,043 | |
| Additions | 3,154 | - | 3,154 | |
| ------ | ------ | ------ | ||
| As at 30th April 2018 | 42,197 | 75,000 | 117,197 | |
| ------ | ------ | ------ | ||
| Amortisation | ||||
| As at 30th April 2016 | 30,698 | 75,000 | 105,698 | |
| Provided for the year | 13,014 | - | 13,014 | |
| Disposals | (7,250) | - | (7,250) | |
| ------ | ------ | ------ | ||
| As at 30th April 2017 | 36,462 | 75,000 | 111,462 | |
| Provided for the year | 3,282 | - | 3,282 | |
| ------ | ------ | ------ | ||
| As at 30th April 2018 | 39,744 | 75,000 | 114,744 | |
| ------ | ------ | ------ | ||
| Net book value | ||||
| As at 30th April 2016 | 15,595 | - | 15,595 | |
| ------ | ------- | ------ | ||
| As at 30th April 2017 | 2,581 | - | 2,581 | |
| ------ | ------- | ------ | ||
| As at 30th April 2018 | 2,453 | - | 2,453 | |
| ------ | ------- | ------ |
The amortisation charge of £3,282 (2017: £13,014) is included within administrative expenses.
8. Property, plant and equipment
| Leasehold improvements |
Plant, machinery and equipment |
Fixtures and fittings | Total | |
|---|---|---|---|---|
| £ | £ | £ | £ | |
| --- | --- | --- | --- | --- |
| Cost | ||||
| As at 30th April 2016 | 567,500 | 4,523,026 | 167,525 | 5,258,051 |
| Additions | - | 253,172 | 741 | 253,913 |
| Disposals | - | (234,408) | (546) | (234,954) |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2017 | 567,500 | 4,541,790 | 167,720 | 5,277,010 |
| Additions | 33,974 | 287,969 | 1,015 | 322,958 |
| Disposals | - | (11,939) | - | (11,939) |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2018 | 601,474 | 4,817,820 | 168,735 | 5,588,029 |
| ------ | ------- | ------ | ------- | |
| Depreciation | ||||
| As at 30th April 2016 | 567,500 | 4,131,647 | 159,580 | 4,858,727 |
| Provided for the year | - | 187,591 | 4,740 | 192,331 |
| Disposals | - | (225,062) | (546) | (225,608) |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2017 | 567,500 | 4,094,176 | 163,774 | 4,825,450 |
| Provided for the year | 8,144 | 185,482 | 2,789 | 196,415 |
| Disposals | - | (11,939) | - | (11,939) |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2018 | 575,644 | 4,267,719 | 166,563 | 5,009,926 |
| ------ | ------- | ------ | ------- | |
| Net book value | ||||
| As at 30th April 2016 | - | 391,379 | 7,945 | 399,324 |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2017 | - | 447,614 | 3,946 | 451,560 |
| ------ | ------- | ------ | ------- | |
| As at 30th April 2018 | 25,830 | 550,101 | 2,172 | 578,103 |
| ------ | ------- | ------ | ------- | |
There are no commitments for capital expenditure contracted but not provided for (2017 - £nil)
9. Trade and other receivables
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Trade receivables | 5,163 | 133,655 |
| Prepayments | 337,887 | 299,032 |
| Other receivables | 242,097 | 312,769 |
| Accrued income | 439,212 | 370,911 |
| ------ | ------ | |
| 1,024,359 | 1,116,367 | |
| ------ | ------ |
The ageing of trade receivables is as follows:
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| 0-29 days | 5,163 | 67,181 |
| 30-59 days | - | 66,474 |
| ------ | ------ | |
| 5,163 | 133,655 | |
| ------ | ------ |
Included in other receivables is an amount of £150,000 (2017: £150,000) which represents cash held in a separate bank account used as security against a bond provided by the Company's bankers (refer note 12). The bond relates to the potential dilapidations costs due at the end of the Company's property lease
10. Cash and cash equivalents
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Current bank accounts | 435,108 | 238,371 |
| Short term deposits with less than three months' maturity | 2,376,047 | 2,272,513 |
| -------- | -------- | |
| 2,811,155 | 2,510,884 | |
| -------- | -------- |
11. Trade and other payables
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Trade payables | 269,191 | 308,635 |
| Other payables | 24,927 | 28,454 |
| Other taxes and social security costs | 51,372 | 57,768 |
| Accruals | 464,183 | 517,196 |
| -------- | -------- | |
| 809,673 | 912,053 | |
| -------- | -------- |
The ageing of financial liabilities is as follows:
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| 0-29 days | 482,162 | 562,725 |
| 30-59 days | 133,788 | 163,854 |
| 60-89 days | 17,404 | 3,010 |
| 90+ days | 124,947 | 124,696 |
| -------- | -------- | |
| 758,301 | 854,285 | |
| -------- | -------- |
12. Provisions
| Leasehold Dilapidations |
||
|---|---|---|
| £ | ||
| --- | --- | --- |
| As at 1st May 2017 and at 30th April 2018 | 150,000 | |
| ------ |
All provisions are due within one year.
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms.
- Financial instruments
The risks associated with financial instruments are set out below.
Foreign currency risk
The Group buys goods and services in currencies other than sterling. The Group's non sterling liabilities and cash flows can be affected by movements in exchange rates. The Group has denominated some of it sales transactions in non sterling currencies and has entered into a forward exchange contract to mitigate this risk.
Credit risk
The Group's credit risk is attributable to its trade receivables and banking deposits. The Group places its deposits with reputable financial institutions to minimise credit risk. The maximum exposure to credit risk for each period is the amount disclosed above as total loans and receivables. For the periods above there were no trade receivables which were past due or impaired. Risk is further mitigated through the use of credit limits, but also through the nature of the customers, who, for the most part, are large multinationals.
Liquidity risk
The Group's policy is to maintain adequate cash resources to meet liabilities as they fall due. All Group payable balances fall due for payment within one year. Cash balances are placed on deposit for varying periods with reputable banking institutions to ensure there is limited risk of capital loss. The Group does not maintain an overdraft facility.
Interest rate risk
The main risk arising from the Group's financial instruments is interest rate risk. The Group placed deposits surplus to short-term working capital requirements with a variety of reputable UK-based banks. These balances are placed at floating rates of interest and deposits have maturities of one to twelve months. The Group's cash and short-term deposits are set out in note 11. Floating-rate financial assets comprise cash on deposit and cash at bank. Short-term deposits are placed with banks for periods of up to 12 months and are categorised as floating-rate financial assets. Contracts in place at 30th April 2018 had a weighted average period to maturity of 28 days (2017: 26 days) and a weighted average annualised rate of interest of 0.6%. (2017: 0.6%)
Interest rate risk sensitivity analysis
It is estimated that a change in base rate to zero would have increased the Group's loss before taxation for the year to 30th April 2018 by approximately £17,000 (2017: £24,000).
It is estimated that an increase in base rate by 1 percent would decrease the Group's loss before taxation for the year to 30th April 2018 by approximately £30,000 (2017: £45,000)
There is no difference between the book and fair value of financial assets and liabilities.
Capital management
The primary aim of the Group's capital management is to safeguard the Group's ability to continue as a going concern, to support its businesses and maximise shareholder value. The Group monitors its capital structure and makes adjustments as and when it is deemed necessary and appropriate to do so using such methods as the issuing of new shares. At present all funding is raised by equity.
14. Share capital
| As at 30th April | ||
| 2018 | 2017 | |
| £ | £ | |
| Authorised | ||
| 78,402,710 Ordinary Shares of £0.01 each | 784,027 | 784,027 |
| 1,781,400 Convertible Preference Shares of £0.01 each | 17,814 | 17,814 |
| ------ | ------ | |
| Allotted, called up and fully paid | ||
| 78,402,710 Ordinary Shares of £0.01 each | 784,027 | 784,027 |
| 588,400 Convertible Preference Shares of £0.01 each | 5,884 | 5,884 |
| ------ | ------ | |
| 789,911 | 789,911 | |
| ------ | ------ |
Share Rights
The ordinary share and preference shares rank pari passu in all respects other than:
· The profits which the Group may determine to distribute in respect of any financial period shall be distributed only among the holders of the Ordinary Shares. The Preference Shares shall not entitle the holders of them to any share in such distributions
· On a return of capital or assets on a liquidation, reduction of capital or otherwise the surplus assets of the Group remaining after payment of its obligations shall be applied:
o First, in paying to the holders of the Preference Shares the amount paid thereon, being the amount equal to the par value of the preference shares excluding any premium; and
o Secondly, the balance of such surplus assets shall belong to and be distributed amongst the holders of the Ordinary Shares.
The Preference Share holders have the right, at any time, to convert the preference shares held to the same number of Ordinary Shares. There are no further redemption rights.
Share options and warrants
Employee related share options are disclosed in note 18.
15. Operating leases
The total future minimum rent payable under non-cancellable operating leases is as follows:
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Property leases which expire: | ||
| Within one year | 97,143 | 97,143 |
| ------ | ------ |
16. Pensions
The Group operates a defined contribution group personal pension scheme. The pension cost charge for the period represents contributions payable by the Group to the scheme and amounted to £150,120 (2017: £139,286).
17. Related party transactions
The directors consider that no one party controls the Group.
Details of key management personnel and their compensation are given in note 4 and in the Directors' Remuneration Report on pages 11 to 13.
18. Share-based payments expense and share options
Share-based payment expense
The Group has incentivised and motivated staff through the grant of share options under the Enterprise Management Incentive (EMI) scheme and through unapproved share options.
At 30th April 2018, the following options, whose fair values have been fully charged to the consolidated statement of total comprehensive income, were outstanding:
Approved share options:
| Date of grant | Number of shares | Period of option |
Exercise Price per share |
| 02/02/09 | 53,000 | 10 years | £0.80 |
| 01/12/09 | 90,000 | 10 years | £0.80 |
| 14/05/10 | 23,200 | 10 years | £0.51 |
| 01/02/12 | 39,634 | 10 years | £0.53 |
Unapproved share options:
| Date of grant | Number of shares | Period of option |
Exercise Price per share |
| 11/11/08 | 40,000 | 10 years | £2.4283 |
| 14/05/10 | 1,897,800 | 10 years | £0.51 |
Black Scholes valuation
| Weighted Average Exercise Price | Number | |||
| 2018 | 2017 | 2018 | 2017 | |
| Outstanding: | £ | £ | ||
| At start of the period | 0.4930 | 0.5021 | 5,710,692 | 4,956,912 |
| Granted in the period | 0.1721 | 0.4850 | 1,266,117 | 906,500 |
| Lapsed in the period | 0.7652 | 0.7384 | (2,170,310) | (152,720) |
| ----- | ----- | -------- | -------- | |
| At the end of the period | 0.2856 | 0.4930 | 4,806,499 | 5,710,692 |
| ----- | ----- | -------- | -------- |
The exercise price of options outstanding at the end of the period ranged between £0.01 and £2.4283 and their weighted average contractual life was 8.0 years (2017: 8.1 years). These share options are exercisable and must be exercised within 10 years from the date of grant.
Stochastic valuation
| Weighted Average Exercise Price | Number | |||
| 2018 | 2017 | 2018 | 2017 | |
| Outstanding: | £ | £ | ||
| At start of the period | 0.51 | 0.51 | 1,923,900 | 1,923,900 |
| Lapsed during the period | 0.51 | - | (2,900) | - |
| ---- | ---- | --------- | --------- | |
| At the end of the period | 0.51 | 0.51 | 1,921,000 | 1,923,900 |
| ---- | ---- | --------- | --------- |
The exercise price of options outstanding at the end of the period was £0.51 (2017: £0.51) and their weighted average contractual life was 3 years (2017: 4 years).
Ilika plc Executive Share Option Scheme 2010
At 30th April 2018 the following share options were outstanding in respect of the Ilika plc Executive Share Option Scheme 2010:
| Date of grant | Number of shares | Period of option | Exercise Price per share |
| 14/05/10 | 23,200 | 10 years | £0.51 |
| 01/02/12 | 35,884 | 10 years | £0.53 |
| 22/03/16 | 729,090 | 10 years | £0.59 |
| 16/03/17 | 757,500 | 10 years | £0.485 |
| 08/02/18 | 1,026,250 | 10 years | £0.21 |
Members of staff in the Group have options in respect of ordinary shares in Ilika plc, which are conditional upon the achievement of a series of financial and commercial milestones.
1,676,610 options lapsed in the year.
Ilika plc unapproved share options
At 30th April 2018 the following share options were outstanding in respect of Ilika plc unapproved share options:
| Date of grant | Number of shares | Period of option | Exercise Price per share |
| 11/11/08 | 40,000 | 10 years | £2.4283 |
| 14/05/10 | 1,897,800 | 10 years | £0.51 |
| 26/02/15 | 177,900 | 10 years | £0.815 |
| 30/09/15 | 160,000 | 10 years | £0.688 |
| 30/09/15 | 1,674,908 | 10 years | £0.01 |
496,600 options lapsed in the year and no options were exercised.
There are 2,139,884 options which were capable of being exercised as at 30th April 2018.
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Share-based payment expense | ||
| Black Scholes calculation | 434,382 | 547,347 |
| ------ | ------ |
Company Balance sheet of Ilika plc
Company number 7187804
| As at 30th April | |||
| Notes | 2018 £ |
2017 £ |
|
| ASSETS | |||
| Non current assets | |||
| Investments in subsidiary undertaking | 21 | 24,229,684 | 121,339 |
| Amount due from subsidiary undertaking | 23 | 33,834 | 24,108,345 |
| ------- | ------- | ||
| 24,263,518 | 24,229,684 | ||
| Current assets | |||
| Trade and other receivables | 22 | 10,119 | 13,646 |
| ------- | ------- | ||
| Total assets | 24,273,637 | 24,243,330 | |
| ------- | ------- | ||
| Equity | |||
| Issued share capital | 789,911 | 789,911 | |
| Share premium | 23,158,967 | 23,158,967 | |
| Retained earnings | 181,889 | 146,304 | |
| ------- | ------- | ||
| 24,130,767 | 24,095,182 | ||
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 24 | 142,870 | 148,148 |
| ------- | ------- | ||
| Total liabilities | 142,870 | 148,148 | |
| ------- | ------- | ||
| Total equity and liabilities | 24,273,637 | 24,243,330 | |
| ------- | ------- |
No profit and loss account is presented for the Company as permitted by Section 408 of the Companies Act 2006. The Company's loss for the year was £398,797 (2017: loss of £509,726).
The notes on pages 44 to 45 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 10th July 2018.
Mr. M Inglis
Chairman
| Year ended 30th April | |||
| 2018 | 2017 | ||
| £ | £ | ||
| Cash flows from operating activities | |||
| Loss before tax | (398,797) | (509,726) | |
| Adjustments for: | |||
| Equity settled share-based payments | 434,382 | 547,347 | |
| ------ | ------ | ||
| Operating cash flow before changes in working capital, interest and taxes | 35,585 | 37,621 | |
| Decrease/ (increase) in trade and other receivables | 3,527 | (11,127) | |
| (Decrease)/ increase in trade and other payables | (5,278) | 11,842 | |
| Increase in amounts due from subsidiary undertaking | (33,834) | (5,873,675) | |
| ------ | ------ | ||
| Cash utilised by operations | - | (5,835,339) | |
| Cash flows from financing activities | |||
| Proceeds from issuance of ordinary share capital | - | 6,300,000 | |
| Costs of share issue | - | (464,661) | |
| ------ | ------ | ||
| Net cash from financing activities | - | 5,835,339 | |
| ------ | ------ | ||
| Net increase in cash and cash equivalents | - | - | |
| Cash and cash equivalents at the start of the period | - | - | |
| ------ | ------ | ||
| Cash and cash equivalents at the end of the period | - | - | |
| ------ | ------ |
Company cashflow statement
Company statement of changes in equity
| Share capital |
Share premium account |
Retained Earnings |
Total attributable to equity holders |
|
|---|---|---|---|---|
| £ | £ | £ | £ | |
| --- | --- | --- | --- | --- |
| --- | --- | --- | --- | --- |
| As at 30th April 2016 | 663,911 | 17,449,628 | 108,683 | 18,222,222 |
| Issue of shares | 126,000 | 6,174,000 | - | 6,300,000 |
| Costs of issue | - | (464,661) | - | (464,661) |
| Share-based payment | - | - | 547,347 | 547,347 |
| Profit and total comprehensive income | - | - | (509,726) | (509,726) |
| ------ | ------ | ------ | ------- | |
| As at 30th April 2017 | 789,911 | 23,158,967 | 146,304 | 24,095,182 |
| Share-based payment | - | - | 434,382 | 434,382 |
| Profit and total comprehensive income | - | - | (398,797) | (398,477) |
| ------ | -------- | ------ | --------- | |
| As at 30th April 2018 | 789,911 | 23,158,967 | 181,889 | 24,130,767 |
| ------ | --------- | ------ | --------- | |
Share capital
The share capital represents the nominal value of the equity shares in issue.
Share premium account
When shares are issued, any premium paid above the nominal value is credited to the share premium reserve.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Company since inception of the business.
19. Accounting polices
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (''IFRSs'') adopted by the European Union.
Taxation, share based payments and financial instruments
For the relevant accounting policies please see note 1
Investments in subsidiary undertakings
Investments in subsidiary undertakings where the Company has control are stated at cost less any provision for impairment.
Key sources of estimation and uncertainty
The company holds a significant investment in its subsidiary, Ilika Technologies Limited, of £24.3m (2017: £0.1m). In assessing the carrying value of this asset for impairment, the directors have exercised judgement in estimating its recoverable amount. The determination of the valuation for this asset is based on the discounted estimated future cash flows generated from out-licensing transactions. The valuation is derived from a financial model that evaluates a range of potential outcomes from what are considered the key variables, including the probability of licensing agreements being signed, the expected licensing terms that will be negotiated and the anticipated revenues generated as a result. Given the level of headroom indicated by the impairment review, the discount rate assumption is not considered to be sufficiently sensitive to change to impact the conclusion of the review.
20. Directors' remuneration
The only employees of the Company are the directors. In respect of directors' remuneration, the disclosures required by Schedule 5 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are included in the detailed disclosures in the audited section of the Directors' Remuneration Report on pages 10 to 12, which are ascribed as forming part of these financial statements.
21. Investment in subsidiary undertaking
Investments in Group undertakings are stated at cost.
Ilika plc has a wholly owned subsidiary, Ilika Technologies Limited. Ilika Technologies Limited (Incorporated in the UK) made a loss for the year of £2,498,527 (2017: £3,030,519) and had net assets as at 30th April 2018 of £3,885,314 (2017: net liabilities of £17,724,504).
| 2018 | 2017 | |
|---|---|---|
| Shares in Group undertakings (at cost) | £ | £ |
| At 1st May | 121,339 | 121,339 |
| Additions | 24,108,345 | - |
| ------ | ------ | |
| At 30th April | 24,229,684 | 121,339 |
| ------ | ------ |
The registered address of Ilika Technologies Limited is Kenneth Dibben House, Enterprise Road, University of Southampton Science Park, Chilworth, Southampton, SO16 7NS.
During the year, the company converted intercompany debtors of £24,108,345 into ordinary shares in its subsidiary, Ilika Technologies Limited
22. Trade and other receivables
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Prepayments | 10,119 | 13,646 |
| ------ | ------ |
23. Amount due from subsidiary undertaking
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Ilika Technologies Limited | 33,834 | 24,108,345 |
| ------ | ------ |
24. Trade and other payables
| 2018 | 2017 | |
|---|---|---|
| £ | £ | |
| Trade payables | 26,170 | 32,903 |
| Accruals | 116,700 | 115,245 |
| ------ | ------ | |
| 142,870 | 148,148 | |
25. Related party transactions
During the year the Company recharged costs totalling £211,618 (2017: £163,744) to its subsidiary, Ilika Technologies Limited. Amounts owed to Ilika Technologies Limited are disclosed in note 23.
Details of key management personnel and their compensation are given in note 4 and in the Directors' Remuneration Report on pages 11 to 13.
The directors consider that no one party controls the Company.
26. Financial instruments
Credit risk
The Company's credit risk is attributable to its receivable of £33,834 from its subsidiary undertaking, Ilika Technologies Limited. As at 30th April 2018, Ilika Technologies Limited had net assets of £3,885,314. The Company makes no allowance for impairment of this balance. Impairment is considered by management based on prior experience, current market and third party intelligence while considering the current economic environment.
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