TIDMRNSM
RNS Number : 6830S
Ransom(William) & Son PLC
15 September 2010
For immediate release
15 September 2010
WILLIAM RANSOM & SON PLC
AUDITED PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2010
William Ransom & Son plc ('Ransom'), the natural health products company,
announces today its preliminary results for the year ended 31 March 2010.
Highlights for the year
· Revenue of GBP30.2m (2009: GBP32.5m)
· Reduction in UK Consumer Health division sales of GBP2.6m (2009: GBP4.2m)
post disposals
· Pharmaceuticals division underlying losses, excluding GBP1.4m fixed
assets impairment, reduced by GBP1.2m during the year to GBP0.4m
· Natural Products division operating profit increased by GBP0.8m to
GBP0.5m operating profit (2009: loss GBP0.3m)
· Operating loss before exceptional items of GBP0.4m (2009: GBP1.9m).
Overall operating loss of GBP12.2m (2009:GBP1.7m) including GBP14m of
exceptional costs of which GBP11.6m relates to goodwill impairment
· Pre exceptional operating expenses reduced by 23% to GBP8.4m
(2009:GBP11m)
· Underlying loss per share 0.9p (2009:2.8p). Overall loss per share 14.49p
(2008:2.51p)
· Net bank debt reduced by GBP1.1m to GBP2.7m (2009: GBP3.8m)
· Net working capital increased to GBP5.7m (2009: GBP5.5m)
Subsequent events
· Secured three year financing agreement with KBC Business Capital in April
2010
· Exited loss making operations in Italy in July 2010
· Ivor Harrison, chief executive, has decided to leave the company to join
a private venture and will be replaced by Fred Whitcomb on 27 September
· David Suddens, non-executive chairman, and Tim Bridge, non-executive
director, will step down at the AGM on 28 October and Sir Roger Jones will take
on the role of non-executive chairman
Commenting on the results and the outlook, David Suddens, Non-executive Chairman
said,
"Progress is painstaking but real. What the company needs is a breathing space
from financial pressure to be able to implement its strategy.
The two manufacturing divisions have undergone wholesale change and have
returned to profitability. The prospects for Ransom Natural Products (RNP)
remain good and sales are currently increasing.
Ransom Consumer Health (RCH, formerly CHD - Consumer Health Division) has become
a more focused business unit following the divestment of most of its licensed
pharmaceutical brands. Products and packaging have been upgraded but marketing
investment is required to make the most of the inherent attractiveness of these
products. As savings from the restructuring of the supply chain are realised,
resources are expected to become available to develop new products and to invest
in consumer communication.
I am pleased to be able to hand over to Sir Roger Jones with the company on a
more stable footing than has been the case for the last three years. I hope that
the new team will realize the full potential of Ransom.
+---------------------------------------+----------+------------------+
| William Ransom & Son plc | | +44 (0)1462 |
| | | 437615 |
+---------------------------------------+----------+------------------+
| Ivor Harrison, Chief Executive | | |
+---------------------------------------+----------+------------------+
| | | |
+---------------------------------------+----------+------------------+
| Buchanan Communications | | +44 (0)20 7466 |
| | | 5000 |
+---------------------------------------+----------+------------------+
| Charles Ryland / James Strong | | |
+---------------------------------------+----------+------------------+
| | | |
+---------------------------------------+----------+------------------+
| Numis Securities | | +44 (0)20 7260 |
| | | 1000 |
+---------------------------------------+----------+------------------+
| Michael Meade | | |
+---------------------------------------+----------+------------------+
Chairman's Statement
There has been progress this year despite the fact that much management time was
devoted to seeking a satisfactory re-financing deal as a result of bank
pressure. Re- financing was eventually achieved with the move from Barclays to
KBC in April 2010 and some measure of financial stability returned to the
business. Executive management will now have more time to build on the
operational improvements underway, notably in supply-chain performance. The
board continues to slim the business and to increase focus on natural consumer
healthcare products. Its intention is to improve margins and hence be able to
increase marketing support for those brands which it has retained.
Performance
Revenue for the year was GBP30.2m, GBP2.3m lower than the prior year revenue of
GBP32.5m. The company made an operating loss before exceptional items of GBP0.5m
(2009: loss of GBP1.9m) and an overall operating loss of GBP12.2m (2009: loss
of GBP1.7m). Exceptional costs totalled GBP14m (2009: GBP1.1m) and were
principally associated with GBP11.6m of goodwill impairment (2009:GBPnil),
GBP1.4m fixed assets impairment and costs associated with financial
restructuring. These items were offset by GBP2.2m gained from brand disposals
(2009: GBP1.3m). Financing charges for the year totalled GBP0.4m (2009:
GBP0.7m).
The underlying loss per share was 0.90p (2009: 2.80p). Basic loss per share was
14.49p (2009: 2.51p).
Net bank debt at the end of the year was GBP2.7m (2009: GBP3.8m). A major
component of the reduction in debt was improved working capital and continued
disposal of non-core brands for a total of GBP3m of which GBP2.6m were used to
reduce bank debt.
Dividend
The company is not in a position to pay a dividend at this time. It will do so
as soon as is possible.
Refinancing
The refinancing of the business occurred on 9 April 2010. Trading had become
extremely difficult in the months before then but the refinance was completed
with KBC Business Capital and gave the company some additional headroom.
Board
Now that the refinancing of the company has been completed and the trading
performance is improving, Ivor Harrison, Chief Executive, has decided to leave
the company and take up a new role in support of the founder at Snapz Ltd, an
early stage healthy snacks business. The board has decided to appoint Fred
Whitcomb as Chief Executive in his place.
On 14 June 2010 Fred Whitcomb was appointed to the board as a non-executive
director. Fred was a founder of Optima with Steve Quinn which Ransom acquired in
2005 and was an executive director of the company between June 2005 and December
2007. He remains a significant shareholder of the company with just under 14% of
the equity and since June 2008 has been a director of Dr Organic limited a
company in which he is also a significant shareholder. Having welcomed Fred back
into the company after his departure in 2007, the board feels that his
entrepreneurial drive will help to grow sales and develop new opportunities for
Ransom, building on the groundwork of his predecessor. Ivor will continue in his
position until 27 September at which point Fred will take up his new position.
The board would like to thank Ivor for his major contribution in returning
Ransom to financial stability and wish him well in his new venture.
Further board changes will come into effect following this year's AGM on 28
October 2010. David Suddens and Tim Bridge will step down to focus on their
other business interests. David has served on the board as a non-executive
director for three and a half years, the last three years as Chairman and Tim
has served four and a half years. The board would like to thank David and Tim
for the invaluable support and advice they have offered to the board during
their tenure.
Chairman's Statement (continued)
The board is pleased to announce that Sir Roger Jones has accepted the position
of non-executive chairman effective from the date of this year's AGM. Sir Roger
has a life-long interest and involvement in natural healthcare and
pharmaceuticals. He is a pharmacist, a Fellow of The Royal Pharmaceutical
Society, and a "Qualified Person" under EEC medicine legislation. He worked for
the Wellcome Foundation between 1968 and 1982 in marketing, operations and
market development and in 1986 founded Penn Pharmaceuticals which he sold in
1999 to an MBO. In addition to founding other pharmaceutical companies, Sir
Roger has been Chairman of the Welsh Development Agency and was a Governor of
the BBC (1996-2002). Today he is Chair of the National Trust committee for
Wales, Chair and ProChancellor of Swansea University and a Fellow of the Learned
Society for Wales.
Ran Oren, Interim Finance Director, will continue in his role until the end of
the calendar year 2010, and in due course, Sir Roger and Fred will announce
further appointments to strengthen the board as befits an AIM quoted company.
Employees
The past year has been one of uncertainty for employees at Ransom given the
financial position of the company. A number of redundancies had to be made and
workload increased for those remaining. I wish to thank all staff for their
ongoing support and good spirit in dealing with the challenges faced.
Outlook
Progress is painstaking but real. What the company needs is a breathing space
from financial pressure to be able to implement its strategy.
The two manufacturing divisions have undergone wholesale change and have
returned to profitability. The prospects for Ransom Natural Products (RNP)
remain good and sales are currently increasing.
Ransom Consumer Health (RCH, formerly CHD - Consumer Health Division) has become
a more focused business unit following the divestment of most of its licensed
pharmaceutical brands. Products and packaging have been upgraded but marketing
investment is required to make the most of the inherent attractiveness of these
products. As savings from the restructuring of the supply chain are realised,
resources are expected to become available to develop new products and to invest
in consumer communication.
I am pleased to be able to hand over to Sir Roger Jones with the company on a
more stable footing than has been the case for the last three years. I hope that
the new team will realize the full potential of Ransom.
David Suddens Non-Executive Chairman
14 September 2010
Chief Executive's Review
The period under review proved to be one of financial restructuring, sales
retrenchment and operational groundwork that should set the base for a more
stable, profitable and growing business in the period to come.
In Summary
The turnaround continues and progress was made towards returning the company to
profitability. A change of bank was required during the year to create more
financial headroom and this was achieved in April 2010. Disposals led to a
reduction in revenue but better margins and improved profitability have been
achieved as a result. Underlying Operating Loss has reduced from GBP1.9m in the
year ended March 2009 to GBP0.5m in the year ended March 2010.
Ransom Consumer Health: Sales declined 19% mainly due to the divestment of
non-core brands while the impact on operating profit was somewhat mitigated by
the reduction in consumer marketing and headcount reductions in warehousing and
distribution.
Ransom Pharmaceuticals: Sales were up 14% as a result of increases in customer
orders and additional orders for Radian B while operating loss increased by
GBP0.3m to GBP1.9m (2009: GBP1.6m) of which GBP1.4m relates to fixed assets
impairment.
Ransom Natural Products: Sales improved 23% and operating results improved by
GBP0.8m to GBP0.5m operating profit from GBP0.3m operating loss for the year
ended March 2009.
Financial Restructuring
In order to pay down debt as banking conditions tightened, the company disposed
of Metanium, the low margin honey brands Manuka Gold and Medibee, and
Snufflebabe and Easybreathe. The cash position in the company was also improved
through effective working capital management as stock levels continued to be
reduced from GBP4.9m in March 2009 to GBP3.7m in March 2010. The company secured
refinancing with KBC in April 2010 which improved the funding availability to
the business.
Supply Chain Restructuring
A major factor in the weakness of the company has been the onerous and costly
supply agreements in Ransom Consumer Health division. The decision was taken at
the start of the year to move our supply base to the UK in order to secure
better terms and more reliable supply. The scale and complexity of this task was
significant but I am pleased that this has now almost been completed.
In addition, much groundwork has been undertaken in the year to identify and
secure additional efficiencies in the supply chain. This work is on-going and is
expected to result in improved margins in the new financial year.
Commercial Restructuring
Since the start of the turnaround, it has been a stated aim to exit loss making
or sub-optimal commercial arrangements and to simplify the business where
possible. In Ransom Consumer Health (RCH) action has been taken to restructure
commercial agreements with some of our key customers that will benefit all
parties going forward, reducing fully funded promotions.
In July 2010 the company reached an agreement to sell certain assets and
liabilities of its loss-making operations in Italy and signed a new agreement
with the incumbent manager to distribute Ransom's products in Italy and other
territories.
Ransom Pharmaceuticals (RP) has made dramatic strides through new commercial
agreements with customers and new business, while margins improved further from
manufacturing efficiencies. The division has also benefited from the sales of
Radian B to the new owner (previously inter-company when the brand was owned by
Ransom and sold through RCH). Underlying Operating results improved by GBP1.2m
from a loss of GBP1.6m to a loss of GBP0.4m (GBP1.9m operating loss including
GBP1.4m fixed assets impairment). The division had been making heavy losses on a
monthly basis but this position has now been reversed.
Ransom Natural Products (RNP) also improved its performance considerably during
the reporting period with revenues up 23%, generating an operating profit of
GBP0.5m (2009: GBP0.3m loss). This again was due to improvements in commercial
terms and gains in new business.
Chief Executive's Review (continued)
Overhead Restructuring
As the company has needed to reduce costs it has been necessary to become a
leaner organisation. Permanent staff numbers were reduced from 188 in March 2009
to 166 in March 2010. Furthermore costs were reduced as the company incurred
lower legal and professional fees and consumer marketing spend was cut back.
Driving Revenues
During the reporting period revenues for the company declined from GBP32.5m to
GBP30.2m, with the brand disposals and discontinuation of lines accounting for
GBP3.7m offset by the increase in revenue of GBP1.4m across RP and RNP. The full
effect of the disposals is expected to reduce company revenues by approximately
a further GBP3m. The challenge is now to rebuild the company's revenues.
Given the cost controls the company has had to impose in the period, the main
task has been to prepare the core brands for future investment when margins
allow while maintaining existing distribution. This has been done in the form of
packaging redesign and development.
The new corporate logo with the botanical symbol is now appearing on all
packaging in order to unify the products for consumers and establish Ransom as a
leader in natural health. Many of the brands' pack designs tended to focus more
on product variety rather than brand name and this is now being addressed. The
Glucosamine range from Health Perception has been rebranded Jointflex. AloeDent
and AloePura have been similarly repackaged. At the same time pack
communication has been greatly enhanced. This change has been welcomed by our
customers and consumers. Further improvements to packaging formats and updated
designs have been made and will be appearing on shelf in 2010.
New product development and introductions, which had been held back for
financial reasons, are now a focus and range extensions will be forthcoming.
Export market development is an opportunity for Ransom and is now being led and
driven successfully. The company has strong ties in the Middle East and growth
of AloeDent continues there.
Prospects
Today the company is more stable financially and underlying performance
continues to improve. However uncertainties remain taking into account the
continuing difficulties in the economy with reduced consumer spending power.
Ivor Harrison
Chief Executive
14 September 2010
Operating and Financial Review
Overview
The company's results for the year have been impacted by the need to restructure
the company's bank debt during the last quarter of the year ended March 2010,
the continued restructure of the company's operation and the current economic
climate. The results for the year therefore include GBP14m of exceptional costs
(2009:GBP1.1m) associated with GBP11.6m goodwill impairment, GBP1.4m fixed
assets impairments and the financial restructuring and the execution of the
turnaround plan, which were partially offset by GBP2.2m (2009: GBP1.3m) gained
through brand disposals.
As part of the turnaround plan and in order to reduce the company's bank debt,
the company divested various non- core brands for a combined value of GBP3m.
These proceeds enabled the company to reduce its bank debt to GBP2.7m (2009:
GBP3.8m) and subsequently to restructure the company's banking facilities on 9
April 2010.
The Consumer Health division managed to maintain its underlying performance
despite challenging market conditions, the impact of the divestment of the above
brands and the rationalisation of product lines. This has been achieved by
controlling costs and cutting out loss making activities.
The company's Pharmaceuticals division has increased its external customer's
revenues over the previous year by 14%.
The Natural Products division materially improved both its sales and operating
result for the year following implementation of various actions designed to move
the division from operating loss to continued operating profit.
The performance of each business unit is discussed in more detail in the
relevant section below. Key performance indicators, treasury policy and the
going concern statement are all disclosed in the director's report.
Ransom Consumer Health
UK
UK revenue declined by GBP2.6m to GBP12m (2009: GBP14.6m) as a result of several
factors including the disposal of various brands and the general unfavourable
economic climate.
Export
Exports of consumer health products decreased by 21% compared to last year
mainly due to the impact of the disposal of Radian B in December 2008 and the
loss of an export customer.
Total
The division's operating profit for the year excluding the impact of GBP11.6m
goodwill impairment (2009:GBPnil) and GBP2.2m gain from disposals (2009:GBP1.3m)
was GBP1.4m (2009: operating profit of GBP1.7m excluding GBP1.3m gain from
disposals) despite the decline in revenue. This was supported by reduced selling
costs, lower marketing and brand support and a general reduction in overheads.
Operating and Financial Review (continued)
Pharmaceuticals Division
Ransom Pharmaceuticals manufactures the company's own MHRA-licensed products as
well as pharmaceuticals and over-the-counter products for third parties. Sales
to third parties increased during the year by 14% to GBP8.8m (2009:GBP7.7m),
mainly due to the continued production of Radian B following the brand disposal
in December 2008.
The division's underlying operating loss, excluding GBP1.4m fixed assets
impairment, reduced by GBP1.2m to GBP0.4m (2009:GBP1.6m).
Natural Products Division
Ransom Natural Products division principally manufactures botanical extracts for
sale to third parties and for use in finished products made by Ransom
Pharmaceuticals. These extracts are typically used as active pharmaceutical
ingredients by pharmaceutical companies or as nutraceutical ingredients by food
and drink manufacturers. Sales to third parties increased by GBP0.7m to GBP3.7m
(2009: GBP3.0m) and the division operating result improved by GBP0.8m to an
operating profit of GBP0.5m (2009: operating loss GBP0.3m) following the
successful implementation of the division's turnaround plan last year.
The business plan envisages integrating the division's know-how into the
Consumer Health division in order to make the Ransom heritage in our consumer
products more apparent and effective.
Financial
The financial performance of the group has been adversely impacted by net
one-off exceptional costs of GBP14m (2009: GBP1.1m), relating mainly to GBP11.6m
of goodwill impairment (2009: GBPnil), GBP1.4m fixed assets impairment and the
continued implementation of the turnaround plan and the financial restructuring
offset by GBP2.2m (2009:GBP1.3m) gained through brand disposals.
Revenue for the year was GBP30.2m (2009: GBP32.5m). The loss before interest,
tax and one-off costs for the year reduced by GBP1.4m to GBP0.5m (2009: loss
GBP1.9m). The overall operating loss of GBP12.2m included GBP14m of one-off
non-recurring costs (2009 loss of 1.7m). Finance costs for the year were GBP0.4m
(2009: GBP0.7m). Operating loss for the year included GBP2.2m gained from the
disposal of number of brands in the last quarter of the year.
Exports accounted for 29% of revenue (2009: 29%) as a result of the combination
of a decrease in RCH export sales offset by an increase in RNP exports. UK
revenue fell by 7% to GBP21.5m. Underlying gross margin reduced by 2% to 26%
(2009: 28%) compared with a 10% margin reduction in the year ended March 2009.
Pre exceptional operating expenses were reduced by 23% to GBP8.4m (2009:
GBP11m). This decrease was the result of a more targeted sales and marketing
spend and continued drive to reduce the company's cost base. Overall operating
expenses, including exceptional costs and GBP11.6m goodwill impairment increased
by 85% to GBP22.4m (2009: GBP12.1m), mainly as a result of the GBP11.6m goodwill
impairment (2009: GBPnil).
The group recorded an overall loss before tax in the year of GBP12.6m (2009:
GBP2.3m). The adjusted basic loss per share, excluding the impact of exceptional
and restructuring costs, was 0.90p (2009: 2.8p). The overall loss per share was
14.49p (2009: 2.51p).
Net bank debt at the end of the year was GBP2.7m (2009: GBP3.8m). The reduction
in bank debt was possible following the disposal of a number of brands and
termination of a distribution agreement during the last quarter of the year
ended March 2010 for a net total of GBP3m. As a result of the disposals the
company was able to reduce its term loan to GBP0.5m by February 2010 from
GBP2.6m in March 2009 and reached to an agreement with its bank to convert the
residual loan to a short term overdraft facility on demand. During March 2010
the company continued to reduce the overdraft facility by a further GBP0.3m to
GBP0.2m as at 31 March 2010.
Operating and Financial Review (continued)
On 9 April 2010 the company agreed a three year financing agreement with KBC
Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The
company's existing debt facilities were replaced by long term asset based
facilities with KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the company's eligible
trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the company's eligible stock
position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly
payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructure the company agreed various operational and
financial covenants measured on a monthly basis in line with the company's
forecast provided to KBC.
As more fully disclosed in note 2 to the accounts a number of factors give rise
to a material uncertainty which may cast significant doubt upon the company's
ability to meet its banking covenants and continue as going concern.
Tax credit for the year was GBP0.3m (2009: GBP0.2m). In addition to tax losses
on which a deferred tax asset of GBPnil (2009: GBP0.4m) has been recognised the
group also has a potential deferred tax asset of GBP0.8m (2009: GBP0.8m) in
respect of tax losses carried forward at the balance sheet date. These losses
are not recognised as the group does not expect to recover these in the
foreseeable future.
Stock levels have been reduced during the year to GBP3.7m (2009: GBP4.9m), and
stock management continues to be a priority. Trade and other receivables were
GBP0.2m higher and trade and other payables decreased by GBP1.3m resulting in a
net increase in the working capital position of GBP0.2m compared with working
capital inflow of GBP3.2m in the year ended 31 March 2009.
Net cash from operating activities reduced by GBP1.8m to GBP1.7m outflow (2009:
inflow GBP0.1m) mainly as a result of GBP0.2m cash outflow from working capital
(2009: inflow GBP3.2m).
Capital Management
The board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The group is dependent on the continuing support of its lending
bank for working capital facilities and so the board's major objective is to
keep borrowings within these facilities. The board manages as capital its
trading capital, which it defines as its net assets plus net debt.
Net debt is calculated as total debt (bank overdrafts, loans and borrowing as
shown in the balance sheet), less cash and cash equivalents. There were no
externally imposed capital requirements in terms of ratios during the year
however the company's articles currently permit borrowings (including letter of
credit facilities) to amaximum of 2 times equity.
The main areas of capital management revolve around the management of the
components of working capital including monitoring inventory turn, age of
inventory, age of trade receivables, monthly profit and loss, weekly cash flow
forecasts and daily cash balances. Major investment decisions are based on
reviewing theexpected future cash flows generation and all major capital
expenditure requires sign off by the group Chief Executive and Finance Director.
There were no major changesin the group's approach to capital management during
the year.
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Consolidated Group Income | Notes | 2010 | | | 2009 | | |
| StatementFor the year ended 31 March | | Before | 2010 | 2010 | Before | 2009 | 2009 |
| 2010 | | exceptional | exceptional | Total | exceptional | exceptional | Total |
| | | items | items | GBP'000 | items | items | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | (Restated) | (Restated) | (Restated) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Revenue | 4 | 30,231 | - | 30,231 | 32,530 | - | 32,530 |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Cost of sales | | (22,262) | - | (22,262) | (23,419) | - | (23,419) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Gross profit | | 7,969 | - | 7,969 | 9,111 | - | 9,111 |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Selling and distribution costs | | (5,210) | - | (5,210) | (7,358) | - | (7,358) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Administrative expenses | | (3,219) | (13,132) | (16,351) | (3,642) | - | (3,642) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Reorganisation expenses | | - | (818) | (818) | - | (1,120) | (1,120) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Total administrative expenses | | (3,219) | (13,950) | (17,169) | (3,642) | (1,120) | (4,762) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Gain on disposal of intangible | | - | 2,244 | 2,244 | - | 1,341 | 1,341 |
| assets | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Operating (loss)/profit | 4,5 | (460) | (11,706) | (12,166) | (1,889) | 221 | (1,668) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Finance revenue | | - | - | - | 4 | - | 4 |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Finance costs | | (283) | (102) | (385) | (527) | (125) | (652) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| (Loss)/profit before taxation | | (743) | (11,808) | (12,551) | (2,412) | 96 | (2,316) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Taxation (expense)/credit | | (16) | 332 | 316 | 49 | 148 | 197 |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| (Loss)/profit attributable to equity | | (759) | (11,476) | (12,235) | (2,363) | 244 | (2,119) |
| holders of the parent | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Loss per share: | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Basic loss per share | 6 | (0.90) | | (14.49) | (2.80p) | | (2.51p) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| Diluted loss per share | 6 | (0.90) | | (14.49) | (2.80p) | | (2.51p) |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
| | | | | | | | |
+--------------------------------------+-------+-------------+-------------+----------+-------------+-------------+------------+
The exceptional items are described more fully in note 5.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2010
+-----------------------------------------+---------+---------------+---------------+
| | | 2010 | 2009 |
| | | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| Loss from continuing operations | | (12,235) | (2,119) |
| attributable to equity holders of the | | | |
| parent | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| Other comprehensive income | | - | - |
+-----------------------------------------+---------+---------------+---------------+
| Exchange adjustment on foreign currency | | (13) | (43) |
| retranslation | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| Other comprehensive income for the | | (13) | (43) |
| period, net of tax | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
| Total comprehensive income for the | | (12,248) | (2,162) |
| period, net of tax | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
| Attributed to equity holders of the | | (12,248) | (2,162) |
| parent | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
| | | | |
+-----------------------------------------+---------+---------------+---------------+
Consolidated Group Balance Sheet
Company Number: 126138
At 31 March 2010
+----------------------------------------+----------+---------------+------------+
| | Notes | 2010 | 2009 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Non-current assets | | | |
+----------------------------------------+----------+---------------+------------+
| Property, plant and equipment | 7 | 2,799 | 4,978 |
+----------------------------------------+----------+---------------+------------+
| Investment property | | - | 125 |
+----------------------------------------+----------+---------------+------------+
| Intangible assets | | | |
+----------------------------------------+----------+---------------+------------+
| Software | 8 | 23 | 30 |
+----------------------------------------+----------+---------------+------------+
| Goodwill | 8 | 10,615 | 22,193 |
+----------------------------------------+----------+---------------+------------+
| Other acquired intangible assets | 8 | 589 | 1,241 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | 14,026 | 28,567 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Current assets | | | |
+----------------------------------------+----------+---------------+------------+
| Inventories | | 3,681 | 4,931 |
+----------------------------------------+----------+---------------+------------+
| Trade and other receivables | | 6,243 | 6,070 |
+----------------------------------------+----------+---------------+------------+
| Cash and cash equivalents | | 52 | 44 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | 9,976 | 11,045 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Total assets | 4 | 24,002 | 39,612 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Current liabilities | | | |
+----------------------------------------+----------+---------------+------------+
| Trade and other payables | | 5,346 | 6,638 |
+----------------------------------------+----------+---------------+------------+
| Obligations under finance leases | 9 | 67 | 66 |
+----------------------------------------+----------+---------------+------------+
| Bank overdraft and loans | 9 | 186 | 686 |
+----------------------------------------+----------+---------------+------------+
| Invoice discount facility | 9 | 2,566 | 1,241 |
+----------------------------------------+----------+---------------+------------+
| Interest rate swap | 9 | 28 | - |
+----------------------------------------+----------+---------------+------------+
| Provisions | | 94 | 605 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | 8,287 | 9,236 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Net current assets | | 1,689 | 1,809 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Non-current liabilities | | | |
+----------------------------------------+----------+---------------+------------+
| Bank loans | 9 | - | 1,911 |
+----------------------------------------+----------+---------------+------------+
| Deferred tax liabilities | 9 | - | 324 |
+----------------------------------------+----------+---------------+------------+
| Obligations under finance leases | 9 | 110 | 175 |
+----------------------------------------+----------+---------------+------------+
| Interest rate swap | 9 | - | 113 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | 110 | 2,523 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Total liabilities | 4 | 8,397 | 11,759 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Net assets | | 15,605 | 27,853 |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Equity | | | |
+----------------------------------------+----------+---------------+------------+
| Share capital | | 8,443 | 8,443 |
+----------------------------------------+----------+---------------+------------+
| Share premium reserve | | 22,013 | 22,013 |
+----------------------------------------+----------+---------------+------------+
| Revaluation reserve | | - | 125 |
+----------------------------------------+----------+---------------+------------+
| Share based payment reserve | | 2 | 2 |
+----------------------------------------+----------+---------------+------------+
| Translation reserve | | (11) | 2 |
+----------------------------------------+----------+---------------+------------+
| Retained losses | | (14,842) | (2,732) |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
| Equity attributable to equity holders | | 15,605 | 27,853 |
| of the parent | | | |
+----------------------------------------+----------+---------------+------------+
| | | | |
+----------------------------------------+----------+---------------+------------+
Consolidated Statement of Changes in Equity
For the year ended 31 March 2010
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| | Share | Share | Revaluation | Share | Translation | Total | Retained | Total |
| | Capital | Premium | | Based | Reserve | Other | | |
| | | | Reserve | Payment | | Reserves | Earnings | |
| | | | | Reserve | | | | |
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | | | GBP'000 |
| | | | GBP'000 | | | GBP'000 | GBP'000 | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| At 1 April 2008 | 8,443 | 22,013 | 185 | 7 | 45 | 237 | (673) | 30,020 |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Loss for the year | - | - | - | - | | | (2,119) | (2,119) |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Other comprehensive | - | - | - | - | (43) | (43) | - | (43) |
| income | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Total Comprehensive | - | - | - | - | (43) | (43) | (2,119) | (2,162) |
| income | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Property revaluation | - | - | (60) | - | - | (60) | 60 | - |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Share based payments | - | - | - | (5) | - | (5) | - | (5) |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| At 31 March 2009 | 8,443 | 22,013 | 125 | 2 | 2 | 129 | (2,732) | 27,853 |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Loss for the year | - | - | - | - | - | | (12,235) | (12,235) |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Other comprehensive | - | - | - | - | (13) | (13) | - | (13) |
| income | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Total Comprehensive | - | - | - | - | (13) | (13) | (12,235) | (12,248) |
| income | | | | | | | | |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| Property disposal | - | - | (125) | - | - | (125) | 125 | - |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
| At 31 March 2010 | 8,443 | 22,013 | - | 2 | (11) | (9) | (14,842) | 15,605 |
+----------------------+---------+---------+-------------+---------+-------------+----------+----------+----------+
+-------------------------------------------+----------+----------+----------+
| Consolidated Group Cash Flow Statement | | | |
| For the year ended 31 March 2010 | | | |
| | | 2010 | 2009 |
| | Notes | GBP'000 | GBP'000 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Loss for the year | | (12,235) | (2,119) |
+-------------------------------------------+----------+----------+----------+
| Adjustments for: | | | |
+-------------------------------------------+----------+----------+----------+
| Depreciation of property, plant and | | 838 | 981 |
| equipment | | | |
+-------------------------------------------+----------+----------+----------+
| Impairment of property, plant and | 5 | 1,438 | - |
| equipment | | | |
+-------------------------------------------+----------+----------+----------+
| Loss from disposal of tangible assets | | - | 3 |
+-------------------------------------------+----------+----------+----------+
| Gain on disposal of intangible assets | 5 | (2,244) | (1,341) |
+-------------------------------------------+----------+----------+----------+
| Share-based payment expense | | - | (5) |
+-------------------------------------------+----------+----------+----------+
| Amortisation of intangible assets | | 11 | 10 |
+-------------------------------------------+----------+----------+----------+
| Impairment of goodwill and intangible | 5 | 11,578 | - |
| asset | | | |
+-------------------------------------------+----------+----------+----------+
| Decrease in provisions | | (511) | (271) |
| | | | |
+-------------------------------------------+----------+----------+----------+
| Impairment of investment property | | - | 60 |
+-------------------------------------------+----------+----------+----------+
| Taxation income | | (317) | (197) |
+-------------------------------------------+----------+----------+----------+
| Net finance costs | | 284 | 648 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Operating cash flows before movements in | | (1,158) | (2,231) |
| working capital | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Decrease in inventories | | 1,250 | 1,805 |
+-------------------------------------------+----------+----------+----------+
| (Increase)/decrease in receivables | | (173) | 523 |
+-------------------------------------------+----------+----------+----------+
| (Decrease)/increase in trade and other | | (1,296) | 878 |
| payables | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net movement in working capital | | (219) | 3,206 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Generated by operations/cash (consumed) | | (1,377) | 975 |
+-------------------------------------------+----------+----------+----------+
| Taxation paid | | (7) | (289) |
+-------------------------------------------+----------+----------+----------+
| Interest paid | | (263) | (595) |
+-------------------------------------------+----------+----------+----------+
| Interest element of finance lease rental | | (15) | (16) |
| payments | | | |
+-------------------------------------------+----------+----------+----------+
| Interest received | | - | 4 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net cash from operating activities | | (1,662) | 79 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Investing activities | | | |
+-------------------------------------------+----------+----------+----------+
| Purchase of property, plant and equipment | | (199) | (528) |
+-------------------------------------------+----------+----------+----------+
| Disposal of property, plant and equipment | | 100 | 29 |
+-------------------------------------------+----------+----------+----------+
| Purchase of intangible assets | | (142) | (26) |
+-------------------------------------------+----------+----------+----------+
| Disposal of investment property | | 125 | - |
+-------------------------------------------+----------+----------+----------+
| Disposal of intangible assets | 8 | 3,034 | 3,093 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net cash from investing activities | | 2,918 | 2,568 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Financing activities | | | |
+-------------------------------------------+----------+----------+----------+
| Repayment of bank loans | 9 | (2,503) | (3,159) |
+-------------------------------------------+----------+----------+----------+
| Repayment of interest swap | 9 | (85) | - |
+-------------------------------------------+----------+----------+----------+
| Capital element of finance lease rental | | (65) | 125 |
| payments | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net cash from financing activities | | (2,653) | (3,034) |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net decrease in cash and cash equivalents | | (1,397) | (387) |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Net foreign exchange difference | | (12) | 43 |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| | | (1,409) | (344) |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at the | | (1,291) | (947) |
| beginning of the year | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at the end of | | (2,700) | (1,291) |
| the year | | | |
+-------------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------------+----------+----------+----------+
Notes to the financial statements
For the year ended 31 March 2010
1. Corporate information
The consolidated financial statements of William Ransom & Son plc ("the
company") for the year ended 31 March 2010 were authorised for issue in
accordance with a resolution passed by the directors on 10 September 2010 at the
registered office of William Ransom & Son plc, Alexander House, 40A Wilbury Way,
Hitchin SG4 0AP. William Ransom & Son plc is a limited company incorporated and
domiciled in England and Wales. The company's ordinary shares are traded on the
Alternative Investment Market (AIM), part of the London Stock Exchange.
The principal activity of the group is the supply of branded cosmetics,
medicines, vitamins and food supplements, the manufacture of pharmaceutical
products and the extraction of plant material for the healthcare, food and
beverage industries.
2. Basis of preparation
The consolidated financial statements have been prepared on the historical cost
basis, except for investment properties and derivative financial instruments
which have been measured at fair value. The preparation of the financial
statements requires the directors to make judgments, accounting estimates and
assumptions that affect the application of policies and the reported amount of
assets and liabilities, income and expenses.
The group financial statements are presented in sterling and all values are
rounded to the nearest thousand pounds (GBP'000) except when otherwise
indicated.
Material uncertainty relating to going concern
On 26 February 2009 the company reached an agreement with its lending bank to
restructure its banking facilities and secured the lending bank's long term
support. The company's banking facilities were restructured as follows:
- GBP2.6m term loan bearing an interest rate of LIBOR plus 3.75% repayable
in quarterly instalments commencing June 2009 through to March 2013.
- Up to GBP4m invoice discount facility based on the company's trade
receivables position bearing an interest rate of base plus 3.25%
- GBP0.1m overdraft facility.
During the year ended March 2010 the company has been working closely with its
lending bank and agreed to continue to reduce its bank debt through the disposal
of non-core assets. During the last quarter of the year ended March 2010 the
company disposed of various non-core assets for a total of GBP3m of which
GBP2.6m were used to reduce the company's long term loan and convert the
residual term loan in total of GBP0.5m to an overdraft facility in February
2010.
On 9 April 2010 the company agreed a three year financing agreement with KBC
Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The
company's existing debt facilities were replaced by long term asset based
facilities with KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the company's eligible
trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the company's eligible stock
position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly
payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructure the company agreed various operational and
financial covenants measured on a monthly basis in line with the company's
forecast provided to KBC.
As more fully disclosed in the Chairman's statement, changes are to be made to
the board during September and October 2010. In recognition of this, the
directors have agreed a comprehensive transition plan for the period up to the
company's AGM. The directors do not consider that this significantly increases
the risk around the successful delivery of the turnaround plan.
Notes to
the financial statements
For the year ended 31 March 2010
2. Basis of preparation (continued)
The directors have also prepared forecasts for the business for the period to 31
March 2012 on the basis of this long term agreement with the company's bank KBC.
These forecasts reflect the company's best estimates concerning the impact of
the following on its ability to meet its banking covenants:
· current economic downturn
· the company's exposure to different sales channels across the business
· the company's ability to meet its sales forecast and operating margin,
notwithstanding the Pharmaceutical Division recovery plan, and required headroom
and cash generation
· the company's ability to achieve the planned supply chain savings
The company has met its operating profit target for the first quarter of the new
financial year and has been able to achieve the planned savings to date.
The directors have identified and considered whether the company will be able to
achieve its turnaround plan and banking covenants as agreed with its lending
bank under various scenarios. The directors have also considered the performance
of the pharmaceutical division that was loss making last year, the underlying
sales assumptions required to meet the consumer health division's sales targets
post brand disposals in the current difficult retail economic climate, and the
uncertainty of achieving the sales targets in time to meet the turnaround plan
and, as a result, its banking covenants. In the event that the company is not
able to materially achieve its forecast the company will not be able to meet the
covenants agreed with its lending bank.
The above factors give rise to a material uncertainty which may cast significant
doubt upon the ability of the company to meet its banking covenants and continue
as a going concern.
Having carefully considered these uncertainties the directors are satisfied that
the cash flow forecasts have been properly prepared and demonstrate that the
company can meet its liabilities as they fall due in line with the agreed debt
structure for the foreseeable future. On this basis they believe that it is
appropriate to prepare the financial statements on a going concern basis. The
financial statements do not include any adjustments to the balance sheet
intangible or tangible fixed assets, the reclassification of long term
liabilities or provision for further liabilities.
Statement of compliance
The annual report and accounts have been prepared using accounting policies
consistent with International Financial Reporting Standards ('IFRS'), as adopted
by the European Union. They have also been prepared in accordance with those
parts of the Companies Act 2006 that apply to companies reporting under IFRS.
Basis of consolidation
All entities for which the group has the power to govern the financial and
operating policies are considered to be subsidiaries. Subsidiaries are fully
consolidated from the date on which control is established by the group. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation. Non Controlling interests represent the portion of profit or loss
and net assets in subsidiaries that is not held by the group and is presented
separately within equity in the consolidated balance sheet, separately from
parent 'shareholders ' equity.
Entities for which the group does not have the power to govern the financial and
operating policies, but where the group does exercise significant influence, are
considered to be associates. Associates are accounted for in accordance with IAS
28 Investments in Associates using the equity method. The financial statements
recognise the group's share of the net assets of the associate and its share of
the profits generated by the associate. Where the associate sustains losses and
the group's proportion of those losses is higher than its original investment,
such excess losses are held in a memorandum account rather than being charged to
the income statement.
Notes to the financial statements
For the year ended 31 March 2010
2. Basis of preparation (continued)
Changes in accounting policy and disclosure
The accounting policies adopted are consistent with those of the previous year,
except for the adoption of the new standards and interpretations which are
mandatory for periods beginning on or after 1 January 2009:
· IFRS 2 Shared based payments - Vesting and Conditions and Cancellations
The standard has been amended to clarify the definition of vesting conditions
and to prescribe the accounting treatment of an award that is effectively
cancelled because a non-vesting condition is not satisfied. The adoption of this
amendment did not have any impact on the financial position or performance of
the Group.
· IFRS 8 Operating Segments
This standard requires disclosure of information about the Group's operating
segments and replaces the requirement to determine primary (business) and
secondary (geographical) reporting segments of the Group. Adoption of this
standard did not have any effect on the financial position or performance of the
Group. The Group determined that the operating segments were the same as the
business segments previously identified under IAS 14 Segment Reporting.
Additional disclosures about each of these segments are shown in Note 4,
including comparative information.
· IAS 1 Revised Presentation of Financial Statements
The revised standard separates owner and non-owner changes in equity. The
statement of changes in equity includes only details of transactions with
owners', with non-owners' changes in equity presented as a single line. In
addition, the standard introduces the statement of comprehensive income: it
presents all items of recognised income and expense, either in one single
statement, or in two linked statements. The Group has elected to present two
statements.
· IAS 23 Borrowing Costs
The revised lAS 23 requires capitalisation of borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying
asset. The Group's previous policy was to expense borrowing costs as they were
incurred. In accordance with the transitional provisions of the amended lAS 23,
the Group has adopted the standard on a prospective basis. Therefore, borrowing
costs are capitalised on qualifying assets with a commencement date on or after
1 January 2009. During the 12 months to 31 December 2009 no borrowing costs were
incurred on qualifying assets.
· IAS 32 Financial Instruments: Presentation and lAS 1 Puttable Financial
Instruments and Obligations Arising on Liquidation
The standards have been amended to allow a limited scope exception for puttable
financial instruments to be classified as equity if they fulfil a number of
specified criteria.
The adoption of these standards did not affect the Group results of operations
or financial position in the year ended 31 March 2010.
Judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the amounts reported for assets and
liabilities as at the balance sheet date and the amounts reported for revenues
and expenses during the year. However, the nature of estimation means that
actual outcomes could differ from those estimates.
In the process of applying the group's accounting policies, management has made
the following judgements, apart from those involving estimations, which have the
most significant effect on the amounts recognised in the financial statements:
Notes to the financial statements
For the year ended 31 March 2010
2. Basis of preparation (continued)
Operating lease commitments
The group has entered into commercial property leases as a lessee and it obtains
the use of property, plant and equipment. The classification of such leases as
operating or finance lease requires the group to determine, based on an
evaluation of the terms and conditions of the arrangements, whether it retains
or acquires the significant risk and rewards of ownership of these assets and
accordingly whether the lease requires an asset and liability to be recognised
in the balance sheet.
Taxation
The company and its subsidiaries are subject to routine tax audits and also a
process whereby tax computations are discussed and agreed with the appropriate
authorities. Whilst the ultimate outcome of such tax audits and discussions
cannot be determined with certainty, management estimates the level of
provisions required for both current and deferred tax on the basis of
professional advice and the nature of current discussions with the tax authority
concerned. Tax computations for all periods ending before 31 March 2008 have
been agreed with the relevant tax authorities.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainly at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
a. Impairment of non-financial assets
The group assesses whether there are any indicators of impairment for all
non-financial assets at each reporting date. Goodwill and other indefinite life
intangibles are tested for impairment annually and at other times when such
indicators exist. Other non-financial assets are tested for impairment when
there are indications that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, management must estimate the
expected future cash flows from the asset or cash-generating unit and choose a
suitable discount rate in order to calculate the present value of those cash
flows. These assessments are not based on observable market data. Further
details are given in note 7.
b. Provisions
The group measures the cost of corporate restructuring using third party
estimates of future liabilities. Due to the uncertainty of these liabilities
such estimates are subject to significant uncertainty. The dilapidation
liability at 31 March 2010 is GBP50,000 (2009: GBP15,000). The corporate
restructuring liability at 31 March 2010 is GBPnil (2009: GBP523,000). These
assessments were based on external valuer opinion and observable market data
respectively.
c. Interest rate swap
The group measures the cost interest rate swap using third party estimates of
future liabilities. Due to the uncertainty of these liabilities such estimates
are subject to significant uncertainty. The interest rate swap liability at 31
March 2010 is GBP28,000 (2009: GBP113,000). The assessment was based on
observable market data.
d. Patents and licences
Licences have been granted for a minimum of 10 years with the option of renewal
based on whether the group meets performance targets during the initial term.
Because similar licences have been successfully renewed in the past, the group
has concluded that these assets have an indefinite useful life.
3. Accounting policies
Foreign currencies
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency rate of exchange ruling at the
balance sheet date. All differences are taken to that income statement. These
are taken directly to equity until the disposal of the net investment, at which
time they are recognised in profit or loss.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting Policies (continued)
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. Income and expenses are
translated at weighted average exchange rates for the year. The resulting
exchange differences are taken directly to a separate component of equity. On
disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in the income
statement.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
The principle exchange rates used were as follows:
+---------------------------------------+--------------+--------------+
| | US$ | Euro |
+---------------------------------------+--------------+--------------+
| Average for the year ended 31 March | 1.729 | 1.213 |
| 2009 | | |
+---------------------------------------+--------------+--------------+
| Closing rate at 31 March 2009 | 1.397 | 1.080 |
+---------------------------------------+--------------+--------------+
| Average for the year ended 31 March | 1.590 | 1.131 |
| 2010 | | |
+---------------------------------------+--------------+--------------+
| Closing rate at 31 March 2010 | 1.517 | 1.121 |
+---------------------------------------+--------------+--------------+
Investment in an associate
The group's investment in its associate is accounted for using the equity method
of accounting. An associate is an entity in which the group has significant
influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the
balance sheet at cost plus post acquisition changes in the group share of net
assets of the associate. Profits and losses resulting from transactions between
the group and the associate are eliminated to the extent of the interest in the
associate.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill arising on acquisition of subsidiaries is included in
intangible assets. Goodwill is tested annually for impairment and carried at
cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to the related
cash-generating units monitored by management, usually at business segment
level. Where the recoverable amount of the cash-generating unit is less than its
carrying amount, including goodwill, an impairment loss is recognised in the
income statement.
The group has taken advantage of the transition provisions of IFRS 3 Business
Combinations. Goodwill arising on acquisitions prior to 1 April 2006 was
amortised in previous periods and was carried in the balance sheet at cost less
accumulated amortisation. Such goodwill is now carried in the balance sheet at
the amortised value less any subsequent provision for impairment.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting policies (continued)
Intangible assets - finite useful life
Patents, licences are accounted for at cost. Where such items have a finite
useful life they are carried at cost less accumulated amortisation. Website
development costs are capitalised as an intangible asset when all the following
conditions are met:
· the website will generate future economic benefits.
· the group has the ability to reliably measure the expenditure
attributable to the website during its development
Other intangible assets are carried at cost less accumulated amortisation and
accumulated impairment losses.
Amortisation begins when an asset is available for use and is calculated on a
straight line basis to allocate the cost of assets over their estimated useful
lives as follows:
Computer software 3-5 years
Website cost 3 years
Intangible assets - indefinite useful life
Intangible assets that have an indefinite useful life, including patents and
licenses are not subject to amortisation and are tested annually for impairment
and whenever events or circumstances indicate that the carrying amount may not
be recoverable.
Assets that are subject to amortisation are tested for impairment when events or
a change in circumstance indicates that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
carrying amount exceeds its recoverable amount. The recoverable amount is
determined as the higher of the asset's fair value less costs incurred on
disposal, and the value of the asset in use. For the purpose of assessing
impairments, assets are grouped at the lowest levels for which there are
identifiable cash flows (cash generating units).
The cost of intangible assets acquired in a business combination is the fair
value of the assets at the date of acquisition.
Research and development
Research and development expenditure is recognised as an expense in the period
in which it is incurred unless it meets the criteria for capitalisation under
IAS 38 Intangible Assets.
Investment property
Investment property, which is property held to earn rentals and/or for capital
appreciation, is stated at its fair value at the balance sheet date. Gains or
losses arising from changes in the fair value of investment property are
included in the income statement for the period in which they arise.
Property plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and
accumulated impairment losses. Cost comprises the aggregate amount paid and the
fair value of any other consideration to acquire the asset and is stated at cost
less accumulated depreciation and accumulated impairment losses. Cost comprises
the aggregate amount paid and the fair value of any other consideration to
acquire the asset and includes costs directly attributable to making the asset
capable of operating as intended.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting policies (continued)
Depreciation is provided on all property, plant and equipment, other than land,
on a straight-line basis over its expected useful life as follows:
Buildings 25 years
Plant and machinery 3 to 20 years
Motor vehicles 3 to 5 years
Leases
The determination of whether an arrangement is, or contains a lease is based on
the substance of the arrangement at the inception date, of whether the
fulfilment of the arrangement is dependent on the use of a specific asset or
assets, or the arrangement conveys a right to use the asset.
Assets held under finance leases, which transfer to the group substantially all
of the risks and benefits of ownership are depreciated over their expected
useful lives on the same basis as owned assets. Lease payments are apportioned
between the reduction of the lease liability and finance charges in the income
statement so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly through the income
statement as borrowing costs. Leases where the lessor retains a significant
proportion of the risks and benefits of ownership of the asset are classified as
operating leases and rentals payable are charged in the income statement on a
straight line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and estimated net realisable value.
The cost of raw materials, consumables and goods for resale is determined on a
first-in first-out basis. The cost of work in progress and finished goods
comprises raw material purchase cost, direct labour and manufacturing overheads
and packing material costs, recovered using the group's standard costing model,
based on a normal level of activity, excluding borrowing costs. Net realisable
value is based on the expected sales price less all estimated costs to
completion and disposal.
Trade and other receivables
Trade and other receivables are stated at their amortised cost less a provision
for irrecoverable amounts. Provision is made when there is evidence that the
group will not be able to recover balances in full. Balances are written off
when the probability of recovery is assessed as being remote.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and in
hand. For the purposes of the consolidated cash flow statement, cash and cash
equivalents consist of cash and short-term deposits as defined above, net of
outstanding bank overdrafts.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting policies (continued)
Taxation
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and laws
that are enacted or substantively enacted by the balance sheet date. The actual
tax paid on profits is determined based on tax laws and regulations that differ
across the jurisdictions in which the group operates. Assumptions are made in
applying the laws to the taxable profits in any given period. Where the eventual
tax paid or reclaimed is different to the amounts originally estimated, the
difference will be charged or credited to the income statement in the period in
which it is determined.
Full provision is made for deferred tax on temporary differences resulting from
the carrying value of an asset or liability and its tax base. Deferred tax
assets are recognised to the extent that it is probable that the deferred tax
asset will be recovered in the future.
Assumptions are made as to the recoverability of tax assets especially as to
whether there will be sufficient future taxable profits in the same
jurisdictions to fully utilise losses in future years.
Derivative financial instruments
The group uses derivative financial instruments such as forward currency
contracts and interest rate swaps to hedge its risks associated with foreign
currency and interest rate fluctuations. Derivatives are carried as assets when
the fair value is positive and as liabilities when the fair value is negative.
While these are economic hedges, hedge accounting is not applied.
Trade and other payables
Trade and other payables are stated at amortised cost.
Vacations, holidays and other short term compensated absences
Accumulating compensated absences are those that are carried forward and can be
used in future periods if the current period's entitlement is not used in full.
The group has measured the expected cost of providing for accumulating
compensated absences at the amount that it expects to pay as a result of the
unused entitlement that has accumulated at the balance sheet date. The same
principle has been applied at all reporting dates.
Advertising and promotional activities
The group recognises such expenditure for advertising and promotional activities
as an asset up to the point at which it has the right to access to the goods
purchased or receives the services.
Pension obligations
The group operates defined contribution pension schemes which cover the majority
of employees. The group has no further payment obligations once the contribution
has been made. Contributions are accounted for as an employee benefit and
charged to the income statement when they are contractually due. The assets of
the scheme are held separately from those of the group in independently
administered funds.
Provisions
Provisions are recognised when the group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation. Where the
group expects some or all of a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense relating to any
provision is presented in the income statement net of any reimbursement. If the
effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects, where appropriate the risks specific to the
liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting policies (continued)
Share based payments
Share based incentive arrangements are provided to management and certain
employees. The cost of equity-settled transactions with employees is measured by
reference to the fair value at the date at which they are granted or the
effective date of adoption of IFRS 2 Share-based Payments. The cost is
recognised as an expense over the vesting period, which ends on the date on
which the relevant employee becomes fully entitled to the award. Fair value is
determined using the Black-Scholes pricing model. In valuing equity-settled
transactions, no account is taken of any vesting conditions, other than
conditions linked to the price of the shares of the company (market conditions).
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired, management's
best estimate of the achievement or otherwise of non-market conditions, and the
number of equity instruments that will ultimately vest or in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement with a corresponding entry in
equity. Where an equity-settled award is cancelled, it is treated as if it had
vested on the date of cancellation, and any cost not yet recognised in the
income statement for the award is expensed immediately. Any compensation paid
up to the fair value of the award at the date of cancellation or settlement is
deducted from equity, with any excess over fair value being treated as an
expense in the income statement.
Revenue recognition
Revenue comprises amounts invoiced for the sale of goods to customers outside
the group less an appropriate deduction for actual and expected returns and
discounts and is stated net of Value Added Tax and other sales taxes or duty.
Revenue comprises sales to third parties at invoiced amounts, with the majority
of sales being priced 'ex-works'. Revenue is presented net of discounts and
promotions which include reduced price and retrospective discounts. Amounts
billed to customers for shipping and handling is classed as revenue where the
group is responsible for carriage, insurance and freight. All shipping and
handling costs incurred by the group are recognised as operating costs.
Revenue is recognised on individual sales where persuasive evidence exists
indicating that all of the following criteria have been met:
· the significant risks and rewards of ownership of the product have been
transferred to the buyer
· neither continuing managerial involvement to the degree usually
associated with ownership, nor effective control over the goods has been
retained
· the amount of revenue can be measured reliably
· it is probable that the economic benefits associated with the sale will
flow to the group
· the costs incurred or to be incurred regarding the sale can be measured
reliably.
These conditions are satisfied when title passes to the customer. Where the
group delivers on a cost, insurance and freight basis, revenue is recognised
when the product is delivered to the destination specified by the customer,
which is typically the destination port or the customer's premises.
Government grants
Government grants are recognised when it is reasonable to expect that the grants
will be received and when all related conditions have been met, usually on
submission of a valid claim for payment. Government grants of a revenue nature
are credited to the income statement so as to match them with the expenditure to
which they relate.
Notes to the financial statements
For the year ended 31 March 2010
3. Accounting policies (continued)
Finance costs
Borrowings are recognised at fair value less directly attributable transaction
costs. After initial recognition, interest bearing liabilities are subsequently
remeasured at amortised cost using the effective interest rate.
Exceptional items
The group presents as exceptional items on the face of the income statement,
those material items of income and expense which, because of the nature and
expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the year, to facilitate comparison with prior periods
and a better understanding of trends in financial performance.
Financial risk management
The group holds financial instruments to finance its operations and to manage
the currency and interest rate risks that arise from these operations. It is the
group's policy that no speculative trading in financial instruments shall be
undertaken. The group finances its operations through a combination of equity,
and debt. The main risks arising from the group's financial instruments are
liquidity risk, foreign currency risk, interest rate risk, credit and price
risk.
Interest bearing loans and borrowings
Obligations for loans, invoice discount facility, overdraft and other borrowings
are recognised when the group becomes party to the related contracts and are
measured initially at the fair value of consideration received, less directly
attributable transaction costs. After initial recognition, interest bearing
loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Gains and losses arising on the repurchase,
settlement or otherwise cancellation of liabilities are recognised respectively
in finance revenue and finance cost.
Prior year reclassification
In the prior year accounts, sales discounts and free stock given to customers
were included within selling and distribution costs. In the current year, the
directors have reclassified the above treatment as follows:
- reduced price and retrospective discounts have been deducted from turnover
- free stock has been included in cost of sales.
This is considered by the directors to be a more appropriate classification of
these items and has no impact on the operating loss for the year ended March
2009.
+-----------------------+------------+--------------+-+-+--------+-+-+
| | Previously | Reclassification | Restated |
| | stated | | |
| | 2009 | | 2009 |
| | GBP'000 | 2009 | GBP'000 |
| | | GBP'000 | |
+-----------------------+------------+------------------+------------+
| | | | | |
+-----------------------+------------+--------------+------------+---+
| Revenue | 33,580 | (1,050) | 32,530 | |
+-----------------------+------------+----------------+------------+-+
| Cost of sales | (23,194) | (225) | (23,419) | |
+-----------------------+------------+----------------+------------+-+
| Gross profit | 10,386 | (1,275) | 9,111 | |
+-----------------------+------------+----------------+------------+-+
| Selling and | (8,633) | 1,275 | (7,358) | |
| distribution costs | | | | |
+-----------------------+------------+----------------+------------+-+
| | | | | | | | |
+-----------------------+------------+--------------+-+-+--------+-+-+
Notes to the financial statements
For the year ended 31 March 2010
4. Segmental information
For management purposes the group is currently organised into three operating
divisions and a corporate head office. The three operating divisions are:
Primary segment
+--------------------+------------------------+-----------------------------+
| Consumer health | Operations located in | Sale of consumer branded |
| | UK, Ireland and Italy | health products. |
+--------------------+------------------------+-----------------------------+
| | | |
+--------------------+------------------------+-----------------------------+
| Pharmaceutical | Operations located in | Manufacture of the group's |
| | the UK | own MHRA licensed products |
| | | and licensed pharmaceutical |
| | | and over-the-counter |
| | | products for third parties. |
+--------------------+------------------------+-----------------------------+
| | | |
+--------------------+------------------------+-----------------------------+
| Natural products | Operations located in | Manufacture of botanical |
| | the UK | extracts used as |
| | | ingredients by the |
| | | pharmaceutical division and |
| | | sold to third parties. Such |
| | | extracts are used both as |
| | | active pharmaceutical |
| | | ingredients and as |
| | | nutraceuticals. |
+--------------------+------------------------+-----------------------------+
Management monitors the operating results of its operating divisions separately
for the purpose of making
decisions about performance assessment. Segment performance is evaluated based
on operating profit or loss
which in certain respects is measured differently from operating profit or loss
in the consolidated statements.
Group financing (including finance costs and finance revenue) and income taxes
are managed on a group basis
and are not allocated to operating segments.
Notes to the financial statements
For the year ended 31 March 2010
4. Segmental information (continued)
+---------------+----------+----------------+----------+--------------+--------------+
| Year ended | Consumer | Pharmaceutical | Natural | Adjustments | Consolidated |
| 31 March | health | | products | and | |
| 2010 | | | | eliminations | |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Revenue | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| External | 17,700 | 8,826 | 3,705 | - | 30,231 |
| customer | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Inter-segment | - | 489 | 340 | (829) | - |
| sales | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 17,700 | 9,315 | 4,045 | (829) | 30,231 |
| revenue | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Operating | | | | | |
| results | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | (7,961) | (1,868) | 464 | - | (9,365) |
| results | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | (2,801) |
| expenses | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Group | | | | | (12,166) |
| operating | | | | | |
| loss | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Net finance | | | | | (385) |
| costs | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Loss before | | | | | (12,551) |
| taxation | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Tax credit | | | | | 316 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Loss for the | | | | | (12,235) |
| year | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Assets and | | | | | |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 17,632 | 3,050 | 3,223 | - | 23,905 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | 97 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Total assets | | | | | 24,002 |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 2,818 | 1,142 | 429 | - | 4,389 |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | 4,008 |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Total | | | | | 8,397 |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Other | | | | | |
| segment | | | | | |
| information | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Capital | | | | | |
| expenditure: | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Property, | 9 | 184 | 6 | - | 199 |
| plant and | | | | | |
| equipment | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Depreciation | 73 | 1,905 | 270 | 37 | 2,287 |
| and | | | | | |
| amortisation | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Intangibles | 142 | - | - | - | 142 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Amortisation; | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Impairment | 11,578 | - | - | - | 11,578 |
| loss | | | | | |
| recognised | | | | | |
| in profit or | | | | | |
| loss | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Write-off of | - | 441 | 31 | 169 | 641 |
| inventories | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
Notes to the financial statements
For the year ended 31 March 2010
4. Segmental information (continued)
+---------------+----------+----------------+----------+--------------+--------------+
| Year ended 31 | Consumer | Pharmaceutical | Natural | Adjustment | Consolidated |
| March 2009 | health | | products | and | |
| | | | | eliminations | |
| | | | | | |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Revenue | | | | | |
| (restated) | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Sales to | 21,792 | 7,727 | 3,011 | - | 32,530 |
| external | | | | | |
| Customer | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Inter-segment | - | 1,948 | 306 | (2,254) | - |
| sales | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 21,792 | 9,675 | 3,317 | (2,254) | 32,530 |
| revenue | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Operating | | | | | |
| results | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 3,060 | (1,564) | (275) | - | 1,221 |
| results | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | (2,889) |
| expenses | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Group | | | | | (1,668) |
| operating | | | | | |
| loss | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Net finance | | | | | (648) |
| costs | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Loss before | | | | | (2,316) |
| taxation | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Tax credit | | | | | 197 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Loss for the | | | | | (2,119) |
| year | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Assets and | | | | | |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 30,915 | 4,761 | 3,700 | - | 39,376 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | 236 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Total assets | | | | | 39,612 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Segment | 3,190 | 732 | 1,522 | - | 5,444 |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Unallocated | | | | | 6,315 |
| liabilities | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | 11,759 |
+---------------+----------+----------------+----------+--------------+--------------+
| | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Other segment | | | | | |
| information | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Capital | | | | | |
| expenditure: | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Property, | 21 | 489 | 11 | 7 | 528 |
| plant and | | | | | |
| equipment | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Intangible | 23 | - | - | - | 23 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Depreciation | 134 | 508 | 281 | 58 | 981 |
| and | | | | | |
| amortisation | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Intangibles | 8 | - | - | 2 | 10 |
| assets | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Amortisation: | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Write down of | - | - | - | 60 | 60 |
| investment | | | | | |
| properties | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Share based | - | - | - | (5) | (5) |
| payment | | | | | |
| expense | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
| Write-off of | - | 460 | 190 | - | 650 |
| inventories | | | | | |
+---------------+----------+----------------+----------+--------------+--------------+
Notes to the financial statements
For the year ended 31 March 2010
4. Segmental information (continued)
+-----------------------------------------+----------+------------+
| Geographical segment | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+-----------------------------------------+----------+------------+
| | | (Restated) |
+-----------------------------------------+----------+------------+
| Revenue | | |
+-----------------------------------------+----------+------------+
| United Kingdom | 21,460 | 23,002 |
+-----------------------------------------+----------+------------+
| Europe, excluding United Kingdom | 4,380 | 4,316 |
+-----------------------------------------+----------+------------+
| Asia and Middle East | 3,189 | 3,838 |
+-----------------------------------------+----------+------------+
| Africa | 559 | 707 |
+-----------------------------------------+----------+------------+
| Australasia | 291 | 142 |
+-----------------------------------------+----------+------------+
| The Americas | 352 | 525 |
+-----------------------------------------+----------+------------+
| | | |
+-----------------------------------------+----------+------------+
| | | |
+-----------------------------------------+----------+------------+
| Group revenue | 30,231 | 32,530 |
+-----------------------------------------+----------+------------+
| | | |
+-----------------------------------------+----------+------------+
| | | |
+-----------------------------------------+----------+------------+
The revenue information above is based on the location of the customer.
+-----------------------------------------+----------+----------+
| | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| Non-current assets | | |
+-----------------------------------------+----------+----------+
| United Kingdom | 14,016 | 28,557 |
+-----------------------------------------+----------+----------+
| Europe excluding United Kingdom | 10 | 10 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| Group non- current assets | 14,026 | 28,567 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
The group does not actively manage its business on a geographical basis and
accordingly does not analyse operating profit on that basis.
Information about major customers
Annual revenue from one customer amounted to GBP3,737,000 (2009:GBPnil) arising
from sales reported in the Consumer health segment.
5. Exceptional items
The group has incurred exceptional costs in the year associated with the
fundamental restructuring of the business and the group financial restructure.
These costs are analysed as follows:
+-----------------------------------------+----------+----------+
| | | |
| | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+-----------------------------------------+----------+----------+
| Recognised in loss attributable to | | |
| equity holders of the parent: | | |
+-----------------------------------------+----------+----------+
| Goodwill impairment | 11,578 | - |
+-----------------------------------------+----------+----------+
| Corporate and other restructuring | 818 | 1,120 |
+-----------------------------------------+----------+----------+
| Impairment of property, plant and | 1,438 | - |
| equipment | | |
+-----------------------------------------+----------+----------+
| Gain on disposal of intangible asset | (2,244) | (1,341) |
+-----------------------------------------+----------+----------+
| Product recall | 116 | |
+-----------------------------------------+----------+----------+
| Finance costs | 102 | 125 |
+-----------------------------------------+----------+----------+
| Tax impact of exceptional items | (332) | (148) |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | 11,476 | (244) |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
Notes to the financial statements
For the year ended 31 March 2010
5. Exceptional items (continued)
Goodwill impairment
After carefully estimating the carrying value of the goodwill at the balance
sheet date, the book value was identified as being impaired. Consequently the
book value of the goodwill was reduced by GBP11.6m (2009: GBPnil) in the year
ended March 2010 to reflect the carrying value as at the balance sheet date as
more fully disclosed in note 8.
Impairment of property, plant and equipment
After carefully estimating the carrying value of the property plant and
equipment at the balance sheet date, the book value was identified as being
impaired. Consequently the book value of the property, plant and equipment was
reduced by GBP1.4m (2009: GBPnil) in the year ended March 2010 to reflect the
carrying value as at the balance sheet date as more fully disclosed in note 7.
Corporate and other restructuring
As part of the fundamental restructuring of the business, costs have been
incurred in restructuring the board, in the provision of interim management
resource and in recruiting the new management team.
Gain on disposal of intangible assets
During last quarter of the year the company disposed of a number of non-core
products for a total of GBP3,034,000 realising a gain on disposal of
GBP2,244,000
On 15 August 2008 and on 4 December 2008 the company disposed of Pavacol D and
Radian B for a total of GBP593,000 and GBP2,500,000 respectively realising a
gain on disposal of GBP1,341,000.
Finance costs
Finance costs in relation to the restructuring of the company and its financing.
Product recall
During the year ended March 2010 the company incurred costs due to a recall of a
licensed product including a contaminated ingredient supplied to the company.
The provision reflects the estimated future costs following the product recall.
Notes to the financial statements
For the year ended 31 March 2010
6. Earnings per share
The calculation of earnings per share is based on the profit on ordinary
activities after taxation and the weighted average number of ordinary shares of
the company.
+-----------------------------------------+------------+------------+
| | 2010 | 2009 |
+-----------------------------------------+------------+------------+
| | No. | No. |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| Weighted average number of shares: | | |
+-----------------------------------------+------------+------------+
| For basic earnings per share | 84,410,207 | 84,410,207 |
+-----------------------------------------+------------+------------+
| Outstanding share options | - | - |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| For diluted earnings per share | 84,410,207 | 84,410,207 |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | (759) | (2,363) |
| Loss attributable to equity holders | | |
| before exceptional items | | |
+-----------------------------------------+------------+------------+
| Exceptional items | (11,476) | 244 |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | (12,235) | (2,119) |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | P | P |
+-----------------------------------------+------------+------------+
| Earnings per share | | |
+-----------------------------------------+------------+------------+
| Basic loss per share | (14.49) | (2.51) |
+-----------------------------------------+------------+------------+
| Diluted loss per share | (14.49) | (2.51) |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
| Adjusted earnings per share | | |
+-----------------------------------------+------------+------------+
| Basic loss per share | (0.90) | (2.80) |
+-----------------------------------------+------------+------------+
| Diluted loss per share | (0.90) | (2.80) |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
The above table shows overall loss per share, and the loss per share adjusted to
exclude the impact of exceptional costs in the year under review.
Notes to the financial statements
For the year ended 31 March 2010
7. Property, plant and equipment
+----------------------------------------+-----------+
| | Plant |
| | and |
| | Equipment |
| | GBP'000 |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| Cost: | |
+----------------------------------------+-----------+
| At 31 March 2008 and 1 April 2008 | 10,220 |
+----------------------------------------+-----------+
| Additions | 528 |
+----------------------------------------+-----------+
| Disposals | (188) |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| At 31 March 2009 and 1 April 2009 | 10,560 |
+----------------------------------------+-----------+
| Additions | 199 |
+----------------------------------------+-----------+
| Disposals | (188) |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| At 31 March 2010 | 10,571 |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| Depreciation and impairment: | |
+----------------------------------------+-----------+
| At 1 April 2007 | (4,763) |
+----------------------------------------+-----------+
| Provided in the year | (981) |
+----------------------------------------+-----------+
| Eliminated on disposals | 162 |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| At 31 March 2009 and 1 April 2009 | (5,582) |
+----------------------------------------+-----------+
| Provided in the year | (838) |
+----------------------------------------+-----------+
| Impairment loss | (1,438) |
+----------------------------------------+-----------+
| Eliminated on disposals | 86 |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| At 31 March 2010 | (7,772) |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
| Net book value: | |
| | |
+----------------------------------------+-----------+
| At 31 March 2010 | 2,799 |
+----------------------------------------+-----------+
| At 31 March 2009 | 4,978 |
+----------------------------------------+-----------+
| At 1 April 2008 | 5,457 |
+----------------------------------------+-----------+
| | |
+----------------------------------------+-----------+
After carefully estimating the fair value of the property plant and equipment at
the balance sheet date, the book value was identified as being impaired.
Consequently the book value of the property, plant and equipment was reduced by
GBP1.4m (2009: GBPnil) in the year ended March 2010 to reflect the directors'
best estimate of its fair value as at the balance sheet date.
The carrying value of plant and equipment held under finance leases and hire
purchase contracts at 31 March 2010 was GBP368,000 (2009: GBP493,000). Leased
assets and assets under hire purchase contracts are pledged as security for the
related finance lease and hire purchase liabilities.
Notes to the financial statements
For the year ended 31 March 2010
8. Intangible assets
+------------------------+-------------+----------+----------+----------+----------+
| | Development | Patents | | | |
| | costs | and | Goodwill | Software | Total |
| | GBP'000 | licences | GBP'000 | GBP'000 | GBP'000 |
| | | GBP'000 | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Cost: | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 1 April 2008 | 36 | 4,417 | 28,610 | 179 | 33,242 |
+------------------------+-------------+----------+----------+----------+----------+
| Additions | - | - | - | 26 | 26 |
+------------------------+-------------+----------+----------+----------+----------+
| Disposals | - | (2,214) | - | - | (2,214) |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2009 and 1 | 36 | 2,203 | 28,610 | 205 | 31,054 |
| April 2009 | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Additions | 131 | - | - | 11 | 142 |
+------------------------+-------------+----------+----------+----------+----------+
| Disposals | - | (987) | - | (9) | (996) |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2010 | 167 | 1,216 | 28,610 | 207 | 30,200 |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Amortisation and | | | | | |
| impairment: | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2008 | (36) | (1,424) | (6,417) | (165) | (8,042) |
+------------------------+-------------+----------+----------+----------+----------+
| Amortisation during | - | - | - | (10) | (10) |
| the year | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Disposals | - | 462 | - | - | 462 |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2009 and 1 | (36) | (962) | (6,417) | (175) | (7,590) |
| April 2009 | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Amortisation during | - | - | - | (11) | (11) |
| the year | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Impairment during the | - | - | (11,578) | - | (11,578) |
| year | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Disposals | - | 204 | - | 2 | 206 |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2010 | (36) | (758) | (17,995) | (184) | (18,973) |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| Net book value: | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2010 | 131 | 458 | 10,615 | 23 | 11,227 |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2009 | - | 1,241 | 22,193 | 30 | 23,464 |
+------------------------+-------------+----------+----------+----------+----------+
| At 31 March 2008 | - | 2,993 | 22,193 | 14 | 25,200 |
+------------------------+-------------+----------+----------+----------+----------+
| | | | | | |
+------------------------+-------------+----------+----------+----------+----------+
Notes to the financial statements
For the year ended 31 March 2010
8. Intangible assets (continued)
Patents and licences consist of intangible assets acquired through business
combinations. These assets have indefinite useful lives, as they relate to the
group's marketed brands. Licences have been granted for a minimum of 10 years
with the option of renewal based on whether the group meets performance targets
during the initial term. Because similar licences have been successfully renewed
in the past, the group has concluded that these assets have an indefinite useful
life.
After carefully estimating the carrying value of the goodwill at the balance
sheet date, the financial assumptions used and the present value of the cash
generating unit the book value was identified as being impaired. Consequently
the book value of the goodwill was reduced by GBP11.6m (2009: GBPnil) to reflect
the carrying value as at the balance sheet date.
With effect from 1 April 2006, the date of transition to IFRS, goodwill was no
longer amortised but is now subject to annual impairment testing. Value in use
is calculated as the net present value of the projected risk-adjusted cash flows
of the cash generating unit to which goodwill is allocated. The cash flow
projections are based on business plans approved by management for the first
year and a projection which covers a period of 15 years. The discount rate
applied may vary depending on the risk profile of the asset being valued but is
15% (2009: 11%) which is the group's average pre-tax discount rate derived from
a capital asset pricing model. The increase in the group's discount rate
resulted from the current difficult retail economic climate.
The directors are of the view that the impairment should be based on a 15 year
forecast (2009: 10 years). The increase in the forecast period is a result of
the directors reconsidering the basis of the forecast and determining that a 15
year period is more appropriate due to the indefinite useful life of some of the
assets and the forecasted performance of the consumer healthcare division's
healthcare brands.
The key assumptions for the value in use calculations are those regarding the
launch dates of products employing these technologies, their long term growth
rates, the discount rate used and the period over which the cash flows are
projected. The assumptions made reflect past experience, market research and
expectations of future market
trends.
Impairment of goodwill and intangibles with indefinite lives
Goodwill acquired through business combinations and patents and licenses have
been allocated for impairment testing purposes to the consumer health cash
generating unit, which is also a reportable segment. This represents the lowest
level in the Group at which goodwill is monitored for internal management
purposes.
The recoverable amount of the consumer health cash generating unit has been
determined based on a value in use calculation using cash flow projections over
a period of 15 years based on financial forecasts approved by the board for the
year ending March 2011. The discount rate applied to cash flow projections is
15% (2009: 11%) and cash flows beyond the one year forecast are extrapolated
using a growth rate from 3%-5% in the first 4 years and 1% thereafter (2009: 5%
to 1%).
a. Key assumptions used in value in use calculations
The calculation of value in use for the consumer health cash generating unit is
most sensitive to the following assumptions:
· Gross margin
· Discount rates
· Growth rate used to extrapolate cash flows beyond the forecast period.
Gross margins are based on average values achieved in the two years preceding
the start of the budget period. These are increased during the long term
forecast period as a result of efficiencies achieved during the forecast period.
Notes to the financial statements
For the year ended 31 March 2010
8. Intangible assets (continued)
Discount rates reflect management's estimate of which is the group's average
pre-tax discount rate derived from a capital asset pricing model adjusted to
current market conditions.
Growth rate estimates are based on published industry research and management
expectation that the consumer healthcare division will increase its market share
within the natural health care market as a result of increased penetration with
its existing and new customers.
b. Sensitivity to changes in assumptions
There are reasonable possible changes in key assumptions which could cause the
carrying value of the unit to exceed its recoverable amount. These are discussed
below.
- Gross margin assumptions - a reduction of 1% in projected gross margin during
the forecast period would
result in a further impairment charge of GBP0.7m.
- Discount rates - an increase of 1% in the assumed discount rate during the
projections period would result
in a further impairment charge of GBP0.7m.
- Growth rate assumptions - a reduction of 1% in the forecasted growth rate
during the projection period
will result in a further impairment charge of GBP1.4m.
9. Financial liabilities
+-----------------------------------------+----------+----------+
| | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+-----------------------------------------+----------+----------+
| Current: | | |
+-----------------------------------------+----------+----------+
| Bank overdraft | 186 | 94 |
+-----------------------------------------+----------+----------+
| Invoice discount facility | 2,566 | 1,241 |
+-----------------------------------------+----------+----------+
| Current obligations under finance | 67 | 66 |
| leases and hire purchase contracts | | |
+-----------------------------------------+----------+----------+
| Interest rate swap | 28 | - |
+-----------------------------------------+----------+----------+
| Current instalments due on bank loans | - | 592 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | 2,847 | 1,993 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| Non-Current: | | |
+-----------------------------------------+----------+----------+
| Non-current obligations under finance | | |
| leases and hire purchase contracts | 110 | 175 |
+-----------------------------------------+----------+----------+
| Interest rate swap | - | 113 |
+-----------------------------------------+----------+----------+
| Non-current instalments due on bank | - | 1,911 |
| loans | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | 110 | 2,199 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
| Bank loans: | | |
+-----------------------------------------+----------+----------+
| Bank Loan | - | 2,503 |
+-----------------------------------------+----------+----------+
| | | |
+-----------------------------------------+----------+----------+
The bank overdraft is secured by a floating charge over the group's assets.
Notes to the financial statements
For the year ended 31 March 2010
9. Financial liabilities (continued)
On 26 February 2009 the group restructured its UK banking facilities and
replaced the majority of its overdraft with an invoice discount facility based
on the company's outstanding trade receivables. The UK facility was secured by a
fix charge over the company's trade receivables and interest was charged at
3.25% above base rate.
The term loan is repayable by instalments with the final payment falling due on
31 March 2013. Interest is charged at 3.75% above 3 month LIBOR.
During the year ended March 2010 the company has been working closely with its
lending bank and agreed to continue to reduce its bank debt through the disposal
of non-core assets. During the last quarter of the year ended March 2010 the
company disposed of various non-core assets for a total of GBP3m of which
GBP2.5m were used to reduce the company's long term loan and convert the
residual term loan in total of GBP0.5m to an overdraft facility in February
2010.
In June 2007 the group entered into a GBP2,000,000 LIBOR interest swap bearing
6.19% fixed rate to hedge the group interest rate exposure against its term loan
expiring in June 2010. As at 31 March 2010 the group provided GBP28,000 (2009:
GBP113,000) for the interest swap liability which was fully repaid post year
end.
The bank term loan was secured by a cross debenture and guarantee between the
company, Health Perception (UK) Limited, Optima Healthcare Limited and Optima
Health (Ireland) Limited and by a debenture granting fixed and floating security
over all assets of the company and selected trademarks as agreed with the
company's lending bank.
10. Analysis of net debt
+--------------------+---------+---------+-------------+-----------+---------+
| | 1 April | Cash | Transfer | Non-cash | 31 |
| | 2010 | flow | GBP'000 | movements | March |
| | GBP'000 | GBP'000 | | GBP'000 | 2010 |
| | | | | | GBP'000 |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Cash and cash | 44 | 8 | - | - | 52 |
| equivalents | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Loans | (2,503) | 2,150 | 475 | (122) | - |
+--------------------+---------+---------+-------------+-----------+---------+
| Invoice discount | (1,241) | (1,325) | - | - | (2,566) |
| facility | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Bank overdrafts | (94) | 383 | (475) | - | (186) |
+--------------------+---------+---------+-------------+-----------+---------+
| Finance leases | (241) | 64 | - | - | (177) |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Net debt | (4,035) | 1,280 | - | (122) | (2,877) |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| | 1 April | Cash | Exchange | Non-cash | 31 |
| | 2008 | flow | differences | movements | March |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | 2009 |
| | | | | | GBP'000 |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Cash and cash | 1,024 | (980) | - | - | 44 |
| equivalents | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Loans | (5,662) | 3,125 | - | 34 | (2,503) |
+--------------------+---------+---------+-------------+-----------+---------+
| Invoice discount | - | (1,241) | - | - | (1,241) |
| facility | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Bank overdrafts | (1,971) | 1,886 | (9) | - | (94) |
+--------------------+---------+---------+-------------+-----------+---------+
| Finance leases | (116) | (125) | - | - | (241) |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
| Net debt | (6,725) | 2,665 | (9) | 34 | (4,035) |
+--------------------+---------+---------+-------------+-----------+---------+
| | | | | | |
+--------------------+---------+---------+-------------+-----------+---------+
The initial costs of establishing the loan facility are being amortised over
term of the loan. The bank loan balance of GBPnil (2009: GBP2,625,000) is
stated net of GBPnil (2009: GBP123,000) in this regard.
Notes to the financial statements
For the year ended 31 March 2010
11. Subsequent events
On 9 April 2010 the company agreed a three year financing agreement with KBC
Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The
company's existing debt facilities were replaced by long term asset based
facilities with KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the company's eligible
trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the company's eligible stock
position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly
payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructure the company agreed various operational and
financial covenants measured on a monthly basis in line with the company's
forecast provided to KBC.
On 9 July 2010 Optima Italia S.r.l agreed the sale of certain of its business
assets and liabilities for a total of GBP45,000 and signed a new distribution
agreement for the company's products in Italy and other territories.
On 3 September it was announced that Ivor Harrison has decided to leave the
company and take up a new role in support of the founder at Snapz Ltd, an early
stage healthy snacks business. The board has decided to appoint Fred Whitcomb as
Chief Executive in his place. Ivor will continue in his position until 27
September at which point Fred will take up his new position.
Further board changes will come into effect following this year's AGM on 28
October 2010. David Suddens and Tim Bridge will step down to focus on their
other business interests.
The board is pleased to announce that Sir Roger Jones has accepted the position
of non-executive Chairman effective from the date of this year's AGM. Sir Roger
has a life-long interest and involvement in natural healthcare and
pharmaceuticals. He is a pharmacist, a Fellow of The Royal Pharmaceutical
Society, and a "Qualified Person" under EEC medicine legislation. He worked for
the Wellcome Foundation between 1968 and 1982 in marketing, operations and
market development and in 1986 founded Penn Pharmaceuticals which he sold in
1999 to an MBO. In addition to founding other pharmaceutical companies, Sir
Roger has been Chairman of the Welsh Development Agency and was a Governor of
the BBC (1996-2002). Today he is Chair of the National Trust committee for
Wales, Chair and ProChancellor of Swansea University and a Fellow of the Learned
Society for Wales.
The financial information set out above does not comprise the Group's statutory
financial statements. Statutory financial statements for the previous financial
year have been delivered to the Registrar of Companies and included the
auditors' report. Financial statements for the year ended 31 March 2010 have
not yet been delivered to the Registrar. The auditors' report on the financial
statements for the year ended 31 March 2009 and the year ended 31 March 2010 is
unqualified and did not include a statement under section 498(2) or (3) of the
Companies Act 2006 but includes an emphasis of matter paragraph for the going
concern assumption.
This preliminary announcement was approved by the board of Directors on 14
September 2010.
While the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the EU, this announcement does not itself contain
sufficient information to comply with IFRS. The Group intends to publish full
financial statements that comply with IFRS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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