hVIVO plc
("hVIVO" or the "Company")
Final results
Transformational year with record EBITDA underlining strong operational delivery
hVIVO plc (AIM & Euronext: HVO), (formerly Open Orphan plc) a rapidly growing specialist contract research organisation (CRO) and world leader in testing infectious and respiratory disease products using human challenge clinical trials, announces its audited results for the 12 months ended 31 December 2022.
Financial highlights
· Revenue up 30% to £50.7m (2021: £39.0m)
· EBITDA increased threefold to £9.1m (2021: £2.9m)
· EBITDA margins of 17.9% (2021: 7.4%), ahead of guidance due to positive impacts of over £1m
· Cash and cash equivalents of £28.4m as at 31 December 2022 (2021: £15.7m)
· Adjusted diluted EPS increased to 0.90p per share (2021: (0.19)p)
· Contracted orderbook increased by 65% to £76m as at 31 December 2022 (2021: £46m)
· One-off special dividend of c.£3.0m, being 0.45p per share reflecting strong cash generation during the year, payable on 9 June 2023 to shareholders on the register on 5 May 2023. The corresponding ex-dividend date is 4 May 2023
Non-core assets
Due to the challenging market conditions, the Board are providing the following updates in relation to hVIVO's non-core assets:
· PrEP Biopharm - hVIVO holds 62.62% of PrEP Biopharm Limited. The directors of PrEP Biopharm Limited have made the decision to commence the process of a solvent liquidation in the coming months
· Imutex - hVIVO have performed an impairment assessment on its 49% holding in Imutex Limited and have determined that a full impairment of the carrying amount of the investment in Imutex is prudent. This impairment reflects a write down from £7m to nil as at 31 December 2022
· Disease in Motion - the Board has decided to postpone all activities relating to the spin-out of Disease in Motion and pursue other growth opportunities that are more aligned with our near term strategic objectives as a human challenge trial business
Operational highlights
· Delivered seven challenge studies and inoculated 413 volunteers in 2022, a 32% increase on the prior year
· Positive impact from efficiency initiatives, including concurrent running of multiple challenge trials, a flexible booking model, and a re-vamped FluCamp platform, resulted in improved staff and volunteer utilisation and lead conversion. This is reflected in the much improved EBITDA margins
· Larger trial sizes, award of multiple unique full-service challenge contracts, and the expansion into new markets (APAC) as a result of increase market awareness of human challenge study benefits
· Expanded portfolio of human challenge models with launch of the Malaria and development of Omicron models
· Facilities expanded in London and Manchester, doubling screening capacity, and increasing bed capacity
· Broadened the scope of the business to offer Phase II / III field based studies
- First contract awarded by existing Big Pharma client to act as a vaccination site for a Phase II field study
· hVIVO laboratories achieved the College of American Pathologists (CAP) accreditation, confirming high standards of excellence and increasing the marketability of our laboratory services
Management strengthened
· The executive management team strengthened with appointments of Yamin 'Mo' Khan as CEO, bringing substantial CRO experience and expertise, and Stephen Pinkerton as CFO
· Martin Gouldstone appointed Independent Non-Executive Director, adding strong corporate development experience in the CRO, healthcare and pharmaceutical sectors
Outlook
· Revenue guidance for 2023 of £55m
· Full visibility on 2023 revenue and into H1 of 2024
· Targeting 2023 EBITDA margin in the mid-to-high teens
· Strong contracted orderbook continues to grow into 2023 despite cancellation of recent contract win
Yamin 'Mo' Khan, Chief Executive Officer of hVIVO, said: "2022 marked a transformative year for hVIVO, as we achieved record financial and operational performance, providing strong validation of our sustainable growth model. With exceptional financial strength, and an impressive orderbook, we are proud to have full visibility of 2023 revenue guidance with strong visibility into H1 2024.
Moving forward, we will continue to leverage our world leading position in the industry, taking advantage of favourable market dynamics. We are expanding our services and challenge models to better support our clients' clinical development portfolios, while simultaneously improving our margins with impactful efficiency initiatives. I have full confidence in the team's ability to deliver operational excellence as well as orderbook conversions, paving the way for long-term sustainable growth and profitability."
Investor presentation
Yamin 'Mo' Khan, Chief Executive Officer, and Stephen Pinkerton, Chief Financial Officer, will provide a live presentation relating to the final results via the Investor Meet Company platform on Tuesday 25 April 2023 at 17:00 BST. Investors can sign up to Investor Meet Company and add to meet hVIVO here.
For further information please contact:
| hVIVO plc | +44 (0) 20 7756 1300 | ||
| Yamin 'Mo' Khan, Chief Executive Officer Stephen Pinkerton, Chief Financial Officer | | ||
| | | ||
| Liberum Capital (Nominated Adviser and Joint Broker) | +44 (0) 20 3100 2000 | ||
| Ben Cryer, Edward Mansfield, Phil Walker, Will King | | ||
| | | ||
| finnCap plc (Joint Broker) | +44 (0) 20 7220 0500 | ||
| Geoff Nash, Charlie Beeson, Nigel Birks, Harriet Ward (ECM) | | ||
| | | ||
| Davy (Euronext Growth Adviser and Joint Broker) | +353 (0) 1 679 6363 | ||
| Anthony Farrell, Niall Gilchrist | | ||
| | | ||
| Walbrook PR (Financial PR & IR) Stephanie Cuthbert / Phillip Marriage / | +44 (0) 20 7933 8780 or hvivo@walbrookpr.com +44 (0) 7796 794 663 / +44 (0) 7867 984 082 / | ||
Notes to Editors
About hVIVO
hVIVO plc (ticker: HVO) (formerly Open Orphan plc) is a rapidly growing specialist contract research organisation (CRO) and the world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials. The Group provides end-to-end early clinical development services to its large, established and growing repeat client base, which includes four of the top 10 largest global biopharma companies.
The Group's fast-growing services business includes a unique portfolio of 11 human challenge models, with a number of new models under development, to test a broad range of infectious and respiratory disease products. The Company has world class challenge agent manufacturing, specialist drug development and clinical consultancy services via its Venn Life Sciences brand, and a lab offering via its hLAB brand, which includes virology, immunology biomarker and molecular testing. The Group offers additional clinical field trial services such as patient recruitment and clinical trial site services.
hVIVO runs challenge studies in London from its Whitechapel quarantine clinic, its state-of-the-art QMB clinic with its highly specialised on-site virology and immunology laboratory, and its clinic in Plumbers Row. To recruit volunteers / patients for its studies, the Company leverages its unique clinical trial recruitment capability via its FluCamp volunteer screening facilities in London and Manchester.
Chairman's Statement
For the year ended 31 December 2022
2022 - A Transformative Year for hVIVO
2022 was a record year for hVIVO and its subsidiaries (the "Group"), in which we delivered another period of profitable and significant growth, as the Group rearmed its position as the world leader in the testing of vaccines and therapeutics using human challenge studies. hVIVO ended the year in a strong financial position, with revenues up 30% year-on-year, EBITDA increasing threefold and EBITDA margins increasing to 17.9%, substantially above market expectations. This exceptional performance has resulted in strong cash generation in 2022. To recognise the Group's performance, the Group will make a one‐o, special dividend to shareholders of 0.45p per share (c. £3.0 million aggregate payment).
hVIVO made excellent operational progress during the year, as the Group delivered seven challenge trials supported by expanded FluCamp screening facilities while building a record contracted orderbook that provides excellent visibility on future revenues that now stretches into H1 2024. hVIVO also broadened and diversified its oering to include new human challenge models, as well as new laboratory and clinical services, which have added additional revenue streams and improved both utilisation and margins.
Organisational excellence
In 2022, the Group continued to deliver on its strategy to build a world-class and focused CRO business. In February 2022, we appointed Yamin 'Mo' Khan as CEO to continue our growth trajectory and build upon the Group's foundations. Mo brought over 25 years of specialist CRO experience to hVIVO and significant industry pedigree, and I am delighted by his impact on the business. Under his leadership, the Group has built a record orderbook of £76m, a sixfold growth since 2019, and demonstrated highly ecient operational delivery, resulting in much improved margins, continued outstanding growth and significant momentum.
Mo has been supported by Stephen Pinkerton, who was appointed CFO in October 2022. Stephen has been with hVIVO since 2017 and has played a leading role in transforming hVIVO's financial position and how we report and forecast our business model, developing pricing models for contracts to help improve average contract value as well as driving margin improvements across the business.
There have also been further changes to the Board, with Martin Gouldstone joining as an Independent Non‐Executive Director in June 2022. Martin brings 30 years of corporate development experience in the CRO, healthcare and pharmaceutical sectors. His experience executing deals across Europe has been important as we continue to internationalise the use of human challenge trials. Following Mo's appointment, I have reverted to the position of Non-Executive Chairman of the Board. I remain fully committed to hVIVO and look forward to continuing to support Mo as he continues to drive our growth strategy forward.
In February 2022, the results from the world's first COVID‐19 human challenge trial were published in peer reviewed journal Nature Medicine. The results provided unique insights into COVID‐19 disease progression and underlined that a COVID‐19 human challenge trial is safe in healthy young adults. The study was a strong endorsement for human challenge trials and we believe it was pivotal in bringing greater worldwide attention to hVIVO, acting as a catalyst to our subsequent growth.
ESG has become an area of significant importance for UK corporates, and I am delighted to report that the Group has established a cross‐business working group ("ESG Group"), which is focused on identifying the risks and opportunities arising from climate change and other social and governance topics. Mo leads the ESG Group which contains representatives from each area of our business and reports directly into the Audit and Risk Committee. The ESG Group will report twice yearly to the Committee, which are responsible for reviewing the Group's ESG reporting and making recommendations to the Board.
Non-core assets
Due to the challenging market conditions, the Board has made a number of updates in relation to hVIVO's non-core assets. The Group holds 62.62% of PrEP Biopharm Limited and despite dedicating resources to realising value from this asset over the past number of years, due to dicult market conditions the directors of PrEP Biopharm will commence the process of a solvent liquidation of PrEP Biopharm in the coming months. In 2018 the Group's investment in PrEP Biopharm was fully impaired and since then has had a nil value in the Group's financial statements.
The Group also holds 49% of Imutex Limited with PepTcell Limited holding 51%. Management have performed an impairment assessment of this asset and determined that a full impairment of the carrying amount of the investment in Imutex is prudent. This impairment reflects a write down from £7,005,000 to Nil as at 31 December 2022.
The Board has decided to postpone all activities relating to the spin-out of Disease in Motion and pursue other growth opportunities that are more aligned with our near term strategic objectives as a human challenge trial business.
Outlook
hVIVO has had a strong start to 2023 with the Group well capitalised, debt free, and with full visibility for the current financial year and into H1 2024. I believe we have a world‐class organisation led by a specialist management team that is well placed to lead and leverage the growth in the human challenge trial market and further strengthen our position as the world leader in the field. While we have had one cancellation in the year, the growing and diverse orderbook from new and existing Big Pharma and biotech clients provides excellent forward visibility and the ability to drive operational leverage through improved utilisation. We remain confident that the Group will continue to leverage its world leading position amidst favourable market dynamics and that hVIVO will continue to deliver profitable and sustainable growth into 2023 and beyond.
Cathal Friel
Chairman
24 April 2023
CEO Statement
For the year ended 31 December 2022
Building a long-term sustainable business model
I am pleased to report that hVIVO has delivered its most significant year of growth to date, establishing our position as the leading provider of human challenge trial services. Our strong performance has resulted in record revenues and EBITDA, with no debt and a robust cash balance of £28.4 million, laying a strong foundation for building sustainable future growth. The record contracted orderbook is indicative of the growing human challenge market and positions us well for 2023 and beyond.
Since my appointment in February 2022, building our contracted orderbook has been our first priority to provide a strong foundation, increase our forward visibility and open avenues for increased eciencies in managing our cost base. Our contracted orderbook and operational model of running multiple challenge trials concurrently have enabled us to increase the utilisation of our quarantine facility, achieve operational eciencies, and drive our EBITDA margins to record levels. I am also delighted with Venn Life Sciences' solid performance, where we continue to provide drug development consulting services to a broad range of clients. We are now generating an increased volume of cross‐selling opportunities between Venn and hVIVO, creating an end‐to‐end early clinical development service oering.
The excellent growth and operational delivery in 2022 are a testament to our outstanding team of world‐class scientists, clinicians and sta who are turning the human challenge trials concept into a vital cog in the global clinical development pathway. I would also like to take this opportunity to thank our volunteers who unselfishly dedicate their time to improving healthcare for the rest of society.
Record results
The Group reported record full year revenues of £50.7 million (2021: £39.0 million), a significant increase of 30% compared to 2021. The Group's contracted orderbook increased to £76 million, up 65% year‐on‐year (2021: £46 million), and over sixfold since 2020 (2019: £12 million). Driving this growth is the continued expansion of the human challenge market and the increasing utility of challenge study data. hVIVO has led the industry in creating market awareness and educating the global biopharma industry to the value of human challenge data as a means of de‐risking late‐stage clinical trials. This has manifested in increased demand for larger sample sizes (i.e., more volunteers) and unique full‐service contracts that include bespoke challenge agent manufacturing, characterisation study, and human challenge trial. hVIVO is in the unique position to deliver these end‐to‐end full‐service projects.
EBITDA profit margins increased to 17.9% (2021: 7.4%), significantly ahead of previous guidance of 13‐15%. This was driven by strong trading and execution of challenge trials, operational eciencies achieved through running multiple concurrent trials and the recognition of postponement and cancellation fees (for a one‐time aggregate of over £1 million). The advanced fees from the orderbook growth and increased operational delivery resulted in a record cash position of £28.4 million as at 31 December 2022 (2021: £15.7 million).
Due to the excellent financial performance in 2022, the Group will make a one‐o, special dividend to shareholders of 0.45p per share, to be approved at the Annual General Meeting. This reflects the Group's exceptional cash generation in the year, in addition to its robust balance sheet.
Superb customer delivery
In 2022, hVIVO continued to solidify its position as the world leader in human challenge trials by serving several new and repeat customers. Our global client base has access to our unrivalled portfolio of infectious and respiratory disease challenge models. Most notable of these is four of the top 10 global biopharma companies. This trend highlights the growing inclusion of human challenge trials into the clinical development pathway of their clinical assets. We anticipate that this year‐on‐year repeat business from influential decision makers in the global biopharma industry will continue to have a positive impact on the worldwide demand for human challenge trials.
hVIVO also provided services to several new and repeat biotech customers, further expanding our diverse and loyal client base across the biopharma spectrum. As a result, there is immense potential for growth among biotech companies, as the cost‐eective human ecacy data generated by human challenge trials becomes increasingly appealing in a tight funding environment. Positive ecacy data can significantly boost the value of an asset, which can be transformative for biotechs. Additionally, challenge trial data can accelerate time‐to‐market for vaccines and antivirals by up to three years, enabling biopharma companies to maximise revenues for their products whilst their patents are active.
Key projects
In 2022, we delivered several landmark projects for our clients across our world‐leading portfolio of human challenge study models. These projects included the inoculation of 413 volunteers, representing a 32% increase from the previous year.
Two key themes among our contract wins in 2022 were the end‐to‐end human challenge contracts and larger volunteer sample size per challenge study. Notably, the trend towards larger sample sizes indicates that the industry is recognising the value of human challenge data as a means of achieving greater utility of data and pursuing lower frequency trial endpoints to further de‐risk their programs ahead of late‐stage field studies.
Our enhanced sales strategy and increased market awareness have led to record sales numbers, with several significant contracts highlighted below:
· £14.7m contract for manufacture, characterisation and challenge study for Big Pharma client
· £13.6m contract for a challenge trial with a US‐based biopharmaceutical client
· £10.4m contract for manufacture and challenge trial for a Big Pharma client
· £7.3m challenge trial for a leading biotech
· £7.2m challenge trial with a Big Pharma client
The value proposition of human challenge trials has been further reinforced by the positive results from human challenge trials conducted by hVIVO. For example, Pfizer received FDA breakthrough designation for its RSV vaccine candidate for older adults following a successful Phase IIa human challenge study conducted by hVIVO. The FDA is now expected to make a final decision on whether to approve the candidate in 2023 as the world's first RSV vaccine. Similarly, Bavarian Nordic received FDA breakthrough designation in 2022 for its RSV vaccine candidate, MVA‐BN® RSV, following a successful human challenge trial conducted by hVIVO. We are proud to have played a significant role in advancing the clinical development of several important RSV vaccine and antiviral candidates that have the potential to alleviate the significant burden of RSV on patients as well as global healthcare systems.
Eciency initiatives
The significant growth in profitability during the period can be attributed to the implementation of operational eciency initiatives across the business. Previously, hVIVO conducted only one challenge trial at a time, which heightened the financial impact of any cancellations or postponements. However, the Group can now concurrently run multiple human challenge trials across its facilities and has devised a flexible booking model with quarterly slot assignments that provides greater adaptability. This capability enables hVIVO to maintain high levels of occupancy at its quarantine clinics, regardless of changes or delays in clients' programs. This will be a key driver in improving EBITDA margins from historical levels.
The increased throughput of challenge studies is supported by the re‐vamped FluCamp platform. Enhancements to the volunteer recruitment system include the implementation of online self‐booking, online screening, and a new CRM to manage more eectively the database of volunteers. These technological upgrades, in addition to the new London and Manchester volunteer screening sites and greater utilisation of volunteers, have resulted in more consistent lead generation through new and existing marketing channels, as well as improved conversion rates. A considerable number of volunteers recruited possess pre‐existing immunity to specific strains, and we now screen volunteers against multiple challenge agents, significantly increasing the probability of volunteers entering our challenge trials and improving volunteer utilisation. These changes have been vital as hVIVO continues to expand and deliver on its growth strategy.
Diversifying our services
hVIVO has continued to expand its revenue streams by oering additional services which can benefit our clients' clinical development portfolios. Our full‐service oering is a unique proposition that involves custom challenge agent manufacturing and characterisation followed by a human challenge trial. This has generated significant interest from both Big Pharma and biotechs, especially as the global biopharma industry seeks to test vaccine and antivirals against specific virus subtypes that are circulating in the population.
In 2022, we launched our Malaria human challenge model and completed the manufacture of an Omicron human challenge agent in Q1 2023. We are in discussions with a number of potential customers in relation to these new models. The continued diversification of our portfolio of challenge models will be a key market dierentiator, consolidating our position as the world leader in challenge trials. We plan to add more new models in 2023 and beyond to address growing demand from new and existing customers.
We have also expanded our CRO service oering, increasing sta and facility utilisation at our clinical and laboratory facilities. Our new clinical site services include utilising the upgraded infrastructure at our Plumbers Row facility for single site or multi‐centre Phase II‐III vaccine field trials. Our first contract in this area was signed with a global pharma company in 2022. These studies enable us to leverage our valuable database of volunteers who are ineligible to participate in human challenge trials.
In addition, our laboratory services have been expanded by increasing the volume of stand‐alone laboratory services contracts. We received the College of American Pathologists (CAP) accreditation as part of our ongoing commitment to maintaining the best‐in‐class quality systems. This key accreditation provides additional quality assurances of our laboratory services for our clients, particularly in the US, and has increased the marketability of our laboratory services.
A long-term market focus - APAC
While our main client base remains in the US and Europe, we have identified the Asia Pacific (APAC) region as a key long term market focus. The APAC clinical market is growing rapidly, with nearly 8,000 clinical trials initiated in the APAC region in 2021, with China being the main driver. At the start of 2023, the Group signed its first human challenge trial contract with an APAC client in over a decade, and this region remains a key focus for our BD team. We will continue to capitalise on opportunities from the APAC region.
Venn Life Sciences
The Venn Life Sciences subsidiary has demonstrated solid performance in 2022, buoyed by ongoing robust relationships with repeat customers. The team in Breda (Netherlands) has shown steady growth across all disciplinary areas (CMC, Non‐Clinical, Clinical, QA). The Pharmacokinetics and Biomarker PM Services in particular have experienced a strong business expansion by providing dedicated services. The Paris team continues to deliver Data Management and Biostatistics services to third‐party customers, as well as increasing collaboration on hVIVO's challenge studies. We are excited by the cross‐selling opportunities with hVIVO in the areas of clinical site and laboratory services and seamless drug development support service ("Bench‐to‐Bed") through our expertise, making it attractive for clients to conduct hVIVO challenge studies.
Summary
I am delighted to report that the Group's performance in 2022 exceeded expectations, with hVIVO delivering record growth numbers across the board. I am very proud of our team's adaptability and commitment to achieving these results despite the changes we have implemented. The financial performance for 2022 is only beginning to reflect the commitment of the team and the excitement we have as we start this new journey.
Looking forward, it is critical to establish a long‐term sustainable growth model. A key forward looking metric is our record contracted orderbook, with full visibility for the current financial year and into H1 2024. I am confident that our improved sales and operational strategies will enable us to address the growing human challenge market. Our focus will be on marketing our existing challenge models, developing new models and targeting new markets, such as the APAC region. Furthermore, we will expand our non‐challenge work including clinical consulting in new areas such drug‐device combination and ATMP, as well as Laboratory Services and Clinical Site Services.
I strongly believe that our operational model is now optimised to deliver long‐ term, sustainable growth and improved profitability. As the world leader in the human challenge market, we remain confident in our ability to deliver value for our shareholders.
Yamin 'Mo' Khan
CEO
24 April 2023
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
| | | Year to | Year to |
| | | 31 December | 31 December |
| | | 2022 | 2021 |
| | | £'000 | £'000 |
| Operations | | | |
| Revenue, from contracts with customers | | 48,477 | 36,864 |
| Other operating income | | 2,220 | 2,141 |
| Direct project and administrative costs | | (41,625) | (36,117) |
| EBITDA before exceptional items | | 9,072 | 2,888 |
| Depreciation & amortisation | | (2,930) | (2,565) |
| Exceptional items | | (119) | 267 |
| Operating profit | | 6,023 | 590 |
| Finance income/(expense) | | 617 | (215) |
| Share based payment charge | | - | (27) |
| Impairment of investment in associate | | (6,957) | - |
| Share of loss of associate using equity method | | (48) | (71) |
| (Loss)/Profit before income tax | | (365) | 277 |
| Income tax (charge) | | (411) | (351) |
| (Loss) for the year | | (776) | (74) |
| (Loss) for the year is attributable to: | | | |
| Shareholders | | (776) | (74) |
| Other comprehensive income | | | |
| Currency translation dierences | | 27 | (111) |
| Total comprehensive (loss) for the year | | (749) | (185) |
|
Earnings per share from operations attributable to shareholders during the year: | | | |
| | | | |
| Basic and diluted (loss) per ordinary share | | | |
| From operations | | (0.12p) | (0.01p) |
| Earnings per share from operations attributable to shareholders during the year: | | | |
| | | | |
| Adjusted and diluted profit/(loss) per ordinary share | | | |
| From operations | | 0.90p | (0.19p) |
All activities relate to continuing operations.
Consolidated and Company's Statement of Financial Position
As at 31 December 2022
| | | Group | Group | Company | Company |
| | | 2022 | 2021 | 2022 | 2021 |
| | | £'000 | £'000 | £'000 | £'000 |
| Assets | | | | | |
| Non-current assets | | | | | |
| Intangible assets | | 6,023 | 6,219 | - | - |
| Property, plant and equipment | | 1,513 | 927 | - | - |
| Investment in associates | | - | 7,005 | - | - |
| Investments in subsidiaries | | - | - | 22,377 | 22,377 |
| Right of use asset | | 1,610 | 2,788 | - | - |
| Total non-current assets | | 9,146 | 16,939 | 22,377 | 22,377 |
| Current assets | | | | | |
| Inventories | | 499 | 659 | - | - |
| Trade and other receivables | | 12,900 | 8,944 | 11,636 | 9,692 |
| Current tax recoverable | | 391 | 38 | 15 | 10 |
| Cash and cash equivalents | | 28,444 | 15,694 | 2,799 | 8,663 |
| Total current assets | | 42,234 | 25,335 | 14,450 | 18,364 |
| Total assets | | 51,380 | 42,274 | 36,827 | 40,741 |
| Equity attributable to owners | | | | | |
| Share capital | | 671 | 671 | 671 | 671 |
| Share premium account | | 4 | 1 | 4 | 1 |
| Merger reserves | | (6,856) | (6,856) | (2,241) | (2,241) |
| Share based payment reserve | | 578 | 327 | 578 | 327 |
| Foreign currency reserves | | 1,358 | 1,331 | 2,014 | 2,014 |
| Retained earnings | | 24,463 | 25,206 | 35,438 | 36,767 |
| Total equity | | 20,218 | 20,680 | 36,464 | 37,539 |
| Liabilities | | | | | |
| Non-current liabilities | | | | | |
| Lease liabilities | | 737 | 863 | - | - |
| Leasehold provision | | 660 | 40 | - | - |
| Total non-current liabilities | | 1,397 | 903 | - | - |
| Current liabilities | | | | | |
| Trade and other payables | | 28,869 | 18,396 | 363 | 3,202 |
| Lease liabilities | | 826 | 1,991 | - | - |
| Leasehold provision | | 70 | 10 | - | - |
| Borrowings | | - | 294 | - | - |
| Total current liabilities | | 29,765 | 20,691 | 363 | 3,202 |
| Total liabilities | | 31,162 | 21,594 | 363 | 3,202 |
| Total equity and liabilities | | 51,380 | 42,274 | 36,827 | 40,741 |
The notes following the financial statements are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board on 24 April 2023.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company's Statement of Comprehensive Income. The loss for the parent Company for the year was £1,362,000 (2021: loss of £1,522,000).
hVIVO Plc (formerly Open Orphan Plc)
Yamin Mo Khan - CEO Registered no: 07514939
Consolidated and Company's Statement of Changes in Shareholders' Equity
| | | | | Share | Foreign | | |
| | Share | Share | Merger | Option | currency | Retained | |
| | capital | premium | reserve | reserve | reserve | earnings | Total |
| Group | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| At 1 January 2021 | 731 | 44,480 | (6,856) | 493 | 1,442 | (17,993) | 22,297 |
| Changes in equity for the Year ended 31 Dec 2021 | | | | | | | |
| Loss for the year | - | - | - | - | - | (74) | (74) |
| Currency dierences | - | - | - | - | (111) | - | (111) |
| Total comprehensive losses for the year | - | - | - | - | (111) | (74) | (185) |
| Transactions with the owners | | | | | | | |
| Share based payment res. | - | - | - | (166) | - | 193 | 27 |
| Shares issued | 3 | 37 | - | - | - | - | 40 |
| Capital reduction | (63) | (44,516) | - | | | 44,579 | - |
| Distribution in specie | - | - | - | - | - | (1,500) | (1,500) |
| Total contributions by and distributions to owners | (60) | (44,479) | - | (166) | - | 43,272 | (1,433) |
| At 31 December 2021 | 671 | 1 | (6,856) | 327 | 1,331 | 25,206 | 20,680 |
| Changes in equity for the Year ended 31 Dec 2022 | | | | | | | |
| Loss for the year | - | - | - | - | | (776) | (776) |
| Currency dierences | - | - | - | - | 27 | - | 27 |
| Total comprehensive income/(loss) for the year | - | - | - | - | 27 | (776) | (749) |
| Transactions with the owners | | | | | | | |
| Share based payment res. | - | - | - | 251 | - | 33 | 284 |
| Shares issued | - | 3 | - | - | - | - | 3 |
| Total contributions by and distributions to owners | - | 3 | - | 251 | - | 33 | 287 |
| At 31 December 2022 | 671 | 4 | (6,856) | 578 | 1,358 | 24,463 | 20,218 |
|
| | | | | | | |
| | | | | Share | Foreign | | |
| | Share | Share | Merger | option | currency | Retained | |
| | capital | premium | reserve | reserve | reserve | earnings | Total |
| Company | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| At 1 January 2021 | 731 | 44,480 | (2,241) | 493 | 2,573 | (4,983) | 41,053 |
| Changes in equity for the year ended 31 December 2021 | | | | | | | |
| Total comprehensive loss for year | - | - | - | - | - | (1,522) | (1,522) |
| Share based payment res. | - | - | - | (166) | - | 193 | 27 |
| Currency dierences | - | - | - | - | (559) | - | (559) |
| Shares issued | 3 | 37 | - | - | - | - | 40 |
| Capital reduction | (63) | (44,516) | - | - | - | 44,579 | - |
| Distribution in specie | - | - | - | - | - | (1,500) | (1,500) |
| Total contributions by and distributions to owners | (60) | (44,479) | - | (166) | (559) | 41,750 | (3,514) |
| At 31 December 2021 | 671 | 1 | (2,241) | 327 | 2,014 | 36,767 | 37,539 |
| Changes in equity for the year ended 31 December 2021 | | | | | | | |
| Total comprehensive loss for year | - | - | - | - | - | (1,362) | (1,362) |
| Share based payment res. | - | - | - | 251 | - | 33 | 284 |
| Shares issued | - | 3 | - | - | - | - | 3 |
| Total contributions by and distributions to owners | - | 3 | - | 251 | - | (1,329) | (1,075) |
| At 31 December 2022 | 671 | 4 | (2,241) | 578 | 2,014 | 35,438 | 36,464 |
Consolidated and Company's Statement of Cash Flows
For the year ended 31 December 2022
| | | Group | Group | Company | Company |
| | | 2022 | 2021 | 2022 | 2021 |
| | | £'000 | £'000 | £'000 | £'000 |
| Cash Flow from operating activities | | | | | |
| Continuing operations | | | | | |
| Cash generated/(used) in operations | | 14,508 | (539) | (5,888) | 680 |
| Income tax (R & D) received | | 1,473 | 1,304 | - | |
| Net cash generated /(used) in operating activities | | 15,981 | 765 | (5,888) | 680 |
| Cash flow from investing activities | | | | | |
| Investment in new subsidiary | | - | - | - | (43) |
| Purchase of property, plant and equipment | | (1,275) | (329) | - | - |
| Purchase of intangible asset | | (87) | (410) | - | |
| Net cash used in investing activities | | (1,362) | (739) | - | (43) |
| Cash flow from financing activities | | | | | |
| Lease payments | | (2,178) | (2,329) | - | - |
| Proceeds from issuance of ordinary shares & options | | 3 | 40 | 3 | 40 |
| Exceptional Costs re RTO, spin‐out & restructuring | | - | (1,169) | - | (409) |
| Interest & FX gains received /(paid) | | 635 | (21) | 19 | - |
| Stamp Duty re capital reduction | | - | - | - | (7) |
| Repayment of Convertible Debenture Security | | (294) | (45) | - | (45) |
| Net cash (used)/generated by financing activities | | (1,834) | (3,524) | 22 | (421) |
| Net increase/(decrease) in cash and cash equivalents | | 12,785 | (3,498) | (5,866) | 216 |
| Cash and cash equivalents at beginning of year | | 15,694 | 19,205 | 8,663 | 8,689 |
| FX translation | | (35) | (13) | 2 | (242) |
| Cash and cash equivalents at end of year | | 28,444 | 15,694 | 2,799 | 8,663 |
Notes to the Financial Statements
For the year ended 31 December 2022
1. Presentation of the financial statements
Description of business
hVIVO Plc (formerly Open Orphan Plc) is a rapidly growing specialist CRO pharmaceutical services group of companies which is the world leader in the testing of vaccines and antivirals using human challenge clinical trials. The Group has a presence in the UK, Ireland, France and Netherlands.
Its parent company hVIVO Plc is a company incorporated in England and Wales. The Company is a public limited company, limited by shares, listed on the AIM market of the London Stock Exchange and on Euronext Growth in Dublin.
Basis of preparation
The financial statements have been prepared in accordance with the Group's accounting policies approved by the Board, 'Critical accounting estimates and judgements. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that aect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could dier from those estimates.
The financial statements have been prepared in accordance with UK adopted international accounting standards ("IFRS"), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSFigures are presented in £000s.
Parent company financial statements
The financial statements of the parent company, hVIVO plc, have been prepared in accordance with IFRS and with UK accounting presentation.
Composition of financial statements
The consolidated financial statements are drawn up in GBP£, the functional currency of hVIVO plc, and in accordance with IFRS accounting presentation. The financial statements comprise:
· Consolidated statement of comprehensive income
· Consolidated statement of financial position
· Consolidated statement of changes in equity
· Consolidated cash flow statement
· Notes to the financial statements
Composition of the Group
The Group comprises hVIVO Plc (formerly Open Orphan Plc) and its subsidiary companies.
Financial period
These financial statements cover the financial year from 1 January to 31 December 2022, with comparative figures for the financial year from 1 January to 31 December 2021.
Accounting principles and policies
Going Concern
The financial statements have been prepared using the historical cost convention modified by the revaluation of certain items, as stated in the accounting policies, and on a going concern basis. The Directors consider the use of the going concern basis to be appropriate given the significant cash reserves at year end and strong contracted order book. The Directors have prepared working capital projections which show that the Group & Company will be able to continue as a going concern.
2. Summary of significant accounting policies
Consolidation
The consolidated financial statements include:
· the assets and liabilities, the results and cash flows, of the Company and its subsidiaries.
· the Group's share of the results and net assets of associates.
· the Group's share of assets, liabilities, revenue and expenses of associates.
Entities over which the Group has the power to direct the relevant activities so as to aect the returns to the Group, generally through control over the financial and operating policies, are accounted for as subsidiaries. Where the Group has the ability to exercise significant influence over entities, they are accounted for as associates. The results and assets and liabilities of associates are incorporated into the consolidated financial statements using the equity method of accounting. The assets, liabilities, revenue and expenses of associates are included in the consolidated financial statements in accordance with the Group's rights and obligations. Interests acquired in entities are consolidated from the date the Group acquires control and interests sold are de‐consolidated from the date control ceases.
Transactions and balances between subsidiaries are eliminated and no profit before tax is taken on sales between subsidiaries until the products are sold to customers outside the Group. The relevant proportion of profits on transactions with associates is also deferred until the products are sold to third parties. Transactions with non‑controlling interests are recorded directly in equity. Deferred tax relief on unrealised intra‐Group profit is accounted for only to the extent that it is considered recoverable.
New accounting requirements
Amendments to accounting standards issued by the IASB and adopted in the year ended 31 December 2022 did not have a material impact on the results or financial position of the Group. Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been adopted early by the Group. These standards, amendments and interpretations are not expected to have a material impact on the results or financial position of the Group in future reporting periods.
Business combinations
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non‑controlling interest in the acquiree either at fair value or at the non‐controlling interest's proportionate share of the acquiree's net assets.
The excess of the consideration transferred, the amount of any non‐controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the dierence is recognised directly in the Statement of Comprehensive Income.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.
Associates
Associates are all entities over which the group has significant influence but not control or joint control as defined under IAS28. Investments in associates are accounted for using the equity method of accounting (see equity method below), after initially being recognised at cost less any fair value adjustment.
Equity Method:
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group's share of the post‐acquisition profits or losses of the investee in profit or loss, and the group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the group's share of losses in an equity‐accounted investment equals or exceeds its interest in the entity, including any other unsecured long‐term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group. The carrying amount of equity‐accounted investments is tested for impairment.
Foreign currency translation
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in GBP£, which is the functional and presentation currency of the main operating entities.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re‐measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year‐end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income within 'direct project and administrative expenses', except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
The results and financial position of all the Group entities (none of which has the currency of a hyper‐inflationary economy) that have a functional currency dierent from the presentation currency are translated into the presentational currency as follows:
· assets and liabilities presented are translated at the closing rate at the date of that reporting period;
· income and expenses are translated at average exchange rates; and
· all resulting exchange dierences are recognised in other comprehensive income.
On consolidation, exchange dierences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange dierences that were recorded in equity are recognised in the Statement of Comprehensive Income as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal monthly management reporting provided to the chief operating decision‐makers. The chief operating decision‐makers ("CODM"), who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the Executive Directors and Non‐Executive Chairman who make strategic decisions.
The first principal activity of the Group is conducting human challenge trials and related laboratory services in London though the hVIVO Services subsidiary. This work is supported by our second principal activity, which is providing a suite of consulting and early clinical trial services to pharmaceutical, biotechnology and medical device organisations, in London and also in Paris and Breda though Venn Life sciences Biometry Services, Venn Life Sciences Ltd and Venn Life Sciences ED B.V.
Previously the Group reported results under two segments, hVIVO and Venn but as the Group has become more integrated, internal management reporting provided to the CODM is on a consolidated basis. As many of our business contracts are multi‐country contracts, pulling resources from many dierent locations, the CODM considers the group to be one business unit.
Management therefore considers both operating segments to form one reporting segment for disclosure purposes.
Revenue
Revenue from contracts
The Group enter into fixed‐price and multi‐service contracts with customers. Revenue from contracts with customers is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for the goods or services and is shown net of Value Added Tax. Revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined by labour hours incurred to the period end as a percentage of the total estimated labour hours for the contract or as considered recoverable in respect of each individual performance obligation.
Payment terms tend to vary between 30 and 90 days.
Provisions for losses to be incurred on contracts are recognised in full in the period in which it is determined that a loss will result from the performance of the contractual arrangement.
The dierence between the amount of revenue from contracts with customers recognised and the amount invoiced on a particular contract is included in the statement of financial position as deferred income. Amounts become billable in advance upon the achievement of certain milestones, in accordance with pre‐agreed invoicing schedules included in the contract or on submission of appropriate detail. Any cash payments received as a result of this advance billing are not representative of revenue earned on the contract as revenues are recognised over the period during which the specified contractual obligations are fulfilled. Amounts included in deferred income are expected to be recognised within one year and are included within current liabilities.
In the event of contract termination, if the value of work performed and recognised as revenue from contracts with customers is greater than aggregate milestone billings at the date of termination, cancellation clauses provide for the Group to be paid for all work performed to the termination date.
Other operating income (mainly research & development tax credits/R&D tax credits)
R&D tax credits are multi‐government backed tax incentive that allows companies to claim back some of the costs they have incurred on research, development and innovation. These are non taxable and involve high level of management judgement.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the eective interest rate applicable.
Exceptional items
These are items of an unusual or non‐recurring nature incurred by the Group and include transactional costs and one‑o items relating to business combinations, such as acquisition expenses, restructuring and redundancy costs.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred. Any borrowing costs associated with qualifying property, plant and equipment are capitalised and depreciated at the rate applicable to that asset category.
Depreciation on assets is calculated using the straight‐line method or reducing balances method to allocate their cost to its residual values over their estimated economic useful lives, as follows:
Leasehold Improvements the shorter of five years or the life of the lease
Plant & Machinery four years
Fixtures and fittings three to five years
The assets' residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying value is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised in direct project administration expenses in the Statement of Comprehensive Income.
Intangible assets
(a) Goodwill
Goodwill represents the excess amount of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired underlying businesses at the date of the acquisition. Goodwill on acquisitions of businesses is included in intangible assets. In normal cases goodwill has an indefinite useful life and is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash‐generating units for the purpose of impairment testing. The allocation is made to those cash‐generating units or groups of cash‐generating units that are expected to benefit from the business combination in which the goodwill arose.
(b) Intellectual property rights
Intellectual property rights relate to patents acquired by the Group. Amortisation is calculated using the straight‐line method over the expected life of no more than 10 years and is charged to direct project and administrative expenses in the Statement of Comprehensive Income.
(c) Capitalised Software development and wearables development
Internally generated intangible assets involving research and development expenditure.
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs are capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria being as follows:
· technical feasibility of the completed intangible asset has been established;
· it can be demonstrated that the intangible asset will generate probable future economic benefits;
· adequate technical, financial and other resources are available to complete the development;
· the expenditure attributable to the intangible asset can be reliably measured; and
· management has the ability and intention to use or sell the intangible asset.
Expenses for research and development include associated wages and salaries, material costs, depreciation on non‑current assets and directly attributable overheads. Development costs recognised as assets are amortised over their expected useful life.
Impairment of non-financial assets
Assets that have an indefinite life such as Goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognised for cash‐generating units, to which Goodwill has been allocated, are credited initially to the carrying amount of Goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash‐generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash‐generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash‐generating unit) in the prior period. A reversal of an impairment loss is recognised in the Statement of Comprehensive Income immediately. If Goodwill is impaired however, no reversal of the impairment is recognised in the financial statements.
Investments in associates
Investments in associates are carried in the Consolidated Statement of Financial Position at the Group's share of their net assets at date of acquisition and of their post‐acquisition retained profits or losses and other comprehensive income together with any goodwill arising on the acquisition. The Group recognises the assets, liabilities, revenue and expenses of joint operations in accordance with its rights and obligations.
As of 31 December 2022, in view of little progress made to move either of Imutex's portfolio towards commercialisation, management does not consider carrying value of the investment in Imutex Limited of £6.9m supported. Full impairment is therefore considered appropriate.
Right of use assets
The Group recognises right of use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets is depreciated on a straight‐line basis over the shorter of its estimated useful life and the lease term.
Short-term leases and leases of low-value assets
The Group applies the short‐term lease recognition exemption to its short‐term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low‐value assets recognition exemption to leases of oce equipment that are considered of low value (i.e., below $5,000). Lease payments on short‐term leases and leases of low‐value assets are recognised as expense on a straight‐line basis over the lease term.
Inventories
Inventories are reported at the lower of cost (purchase price and/or production cost) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and applicable variable selling expenses.
Financial instruments
Financial assets
The financial assets of the group consist of trade receivables, accrued income, cash and other receivables. Financial assets are measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss. The measurement basis is determined by reference to both the business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. A lifetime expected credit loss (ECL) allowance is recorded on initial recognition of a financial asset. If there is subsequent evidence of a significant increase in the credit risk of an asset, the allowance is increased to reflect the full lifetime ECL. If there is no realistic prospect of recovery, the asset is written o. ECLs are recognised in the Statement of Comprehensive Income.
Cash and cash equivalents
Cash and short‐term deposits in the Statement of Financial Position comprise cash at bank and in hand and short‑term deposits with an original maturity of less than three months, reduced by overdrafts to the extent that there is a right of oset against other cash balances.
Financial liabilities
The financial liabilities of the group consist of trade payables, accrued expenses, lease liabilities, and borrowings. Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an eective hedge, as appropriate.
Borrowings
Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period date.
Borrowing costs are expensed in the consolidated Statement of Comprehensive Income under the heading 'finance costs'. Arrangement and facility fees together with bank charges are charged to the Statement of Comprehensive Income under the heading 'direct project and administrative costs'.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted at the reporting period date in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax assets are recognised for all deductible temporary dierences, carry‐forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sucient taxable profits against which the future reversal of the underlying temporary dierences can be deducted.
The carrying value of the amount of deferred tax assets is reviewed at each reporting period date and reduced to the extent that it is no longer probable that sucient taxable profit will be available to allow all, or part, of the tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the reporting period date.
Deferred income tax assets and liabilities are oset when there is a legally enforceable right to oset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or dierent taxable entities where there is an intention to settle the balances on a net basis.
Share capital
Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.
Merger reserve
The reserve represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings. The relief is only available to the issuing company securing at least a 90% equity holding in the acquired undertaking in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided by the issue to the issuing company of equity shares in the other company.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in‐substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in‐substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined contribution plans, under which the Group pays fixed contributions into a separate entity with the pension cost charged to the Statement of Comprehensive Income as incurred.
The Group has no further obligations once the contributions have been paid.
Share-based payment
Where equity settled share options and warrants are awarded to Directors and employees, the fair value of the options and warrants at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period and the corresponding entry recorded in the share‐based payment reserve. Non‐market vesting conditions are reflected by adjusting the number of equity instruments expected to vest at each reporting date so that, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.
Leasehold provision
Provisions for dilapidations and onerous lease commitments are recognised when the Group has a present or constructive obligation as a result of past events. The recognition of a provision requires management to make best estimates of the consideration required to settle the present obligation at the end of the reporting period, reflecting the risks and uncertainties surrounding the obligation. There is reasonable uncertainty around the likelihood and timing of the exit of the lease as negotiations will involve third parties.
3. Expenses - analysis by nature
The following items have been included in operating profit:
| | 2022 | 2021 |
| | £'000 | £'000 |
| Employee benefit expense | 18,081 | 15,897 |
| Other expenses | 23,544 | 20,220 |
| Total direct project and administrative costs | 41,625 | 36,117 |
| Also included within operating profit are the below depreciation and amortisation charges: | | |
| PPE Depreciation and amortisation | 999 | 523 |
| Depreciation related to Right of use Assets | 1,931 | 2,039 |
Also included within operating profit are exceptional items as shown below:
| | 2022 | 2021 |
| | £'000 | £'000 |
| Exceptional items include: | | |
| - Transaction costs relating to business combinations, acquisitions & Re‐organisations | 119 | 923 |
| - Transaction gain relating to Capital Reduction and spin out | - | (1,190) |
| Total exceptional items | 119 | (267) |
Services provided by the Company's auditor and its associates. During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditor and its associates:
| | 2022 | 2021 |
| | £'000 | £'000 |
| Fees payable to Company's auditor for the audit of the parent Company and consolidated financial statements | 52 | 38 |
| Fees payable to Company's auditor for the audit of subsidiaries and their consolidated financial statements | 37 | 39 |
| Total paid to the Company auditor | 89 | 77 |
| Fees payable to the auditors of subsidiaries for services: | | |
| - The audit of Company's subsidiaries pursuant to legislation paid to other auditors | 55 | 62 |
| - Other services paid to other auditors | 1 | 7 |
| - Tax services paid to other auditors | 2 | 11 |
| Total paid to other auditors | 58 | 80 |
| Total auditor's remuneration | 147 | 157 |
4. Directors' emoluments
| | 2022 | 2021 |
| | £'000 | £'000 |
| Aggregate emoluments | 995 | 526 |
| Social Security Costs | 119 | 62 |
| Contribution to defined contribution pension scheme | 42 | 17 |
| Total Directors' remuneration | 1,156 | 605 |
See further disclosures within the Report of the Remuneration Committee.
| | 2022 | 2021 |
| Highest paid Director | £'000 | £'000 |
| Total emoluments received | 518 | 172 |
| Defined contribution pension scheme | 27 | 17 |
A Long‐Term Incentive Plan ("LTIP") was agreed with the highest paid director during the year. No options were exercised during the year by the highest paid director.
5. Employee benefit expense
| | 2022 | 2021 |
| | £'000 | £'000 |
| Wages and salaries | 15,077 | 13,179 |
| Social security costs | 2,100 | 1,846 |
| Pension costs | 904 | 872 |
| Total employee benefit expense | 18,081 | 15,897 |
6. Average number of people employed
| | 2022 | 2021 |
| | No | No |
| Average number of people (including Executive Directors) employed was: | | |
| Administration | 43 | 38 |
| Clinical research | 161 | 172 |
| Sales and marketing | 6 | 8 |
| Total average number of people employed | 210 | 218 |
Monthly weighted average used in above calculation.
7. Finance income and costs
| | 2022 | 2021 |
| | £'000 | £'000 |
| Interest expense: | | |
| - Interest on Lease liabilities | (133) | (227) |
| - Interest on other loans | 1 | 7 |
| Finance costs | (132) | (220) |
| Finance income | | |
| - FX gain on sales & expenses | 613 | - |
| - Interest income on cash and short‐term deposits | 136 | 5 |
| Finance income | 749 | 5 |
| Net finance income/(expense) | 617 | (215) |
8. Income tax expense
| | 2022 | 2021 |
| Group | £'000 | £'000 |
| Current tax: | | |
| Current year research and development tax charge | 352 | 350 |
| Current year other | 50 | - |
| Current year hVIVO Inc US tax charge | 9 | 6 |
| Total current tax charge | 411 | 356 |
| Deferred tax (note 20): | | |
| Origination and reversal of temporary dierences | - | (5) |
| Total deferred tax | - | (5) |
| Income tax charge | 411 | 351 |
The income tax charge on the Group's results before tax diers from the theoretical amount that would arise using the standard tax rate applicable to the profits of the consolidated entities as follows:
| | 2022 | 2021 |
| | £'000 | £'000 |
| (Loss)/Profit before tax | (365) | 277 |
| Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19.00% (2021: 19%) | (69) | 53 |
| Tax eects of: | | |
| - Expenses not deductible for tax purposes | 1,488 | 168 |
| - VLS Germany tax risk on liquidation | 51 | - |
| - Current Year R & D Tax (credit) | (194) | (108) |
| - Temporary timing dierences | (153) | (182) |
| - Adjustments in respect of prior year | 33 | 37 |
| - Additional allowances deductible for tax purposes | 125 | (79) |
| - Losses carried forward | (870) | 462 |
| Income tax charge | 411 | 351 |
There are no tax eects on the items in the Statement of Comprehensive Income.
9. Earnings/(Losses) per share
(a) Basic
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
| | 2022 | 2021 |
| | £'000 | £'000 |
| Losses for the year | (776) | (74) |
| Total | (776) | (74) |
| Weighted average number of Ordinary Shares in issue | 670,943,918 | 670,187,313 |
| Losses per share from operations | (0.12p) | (0.01p) |
(b) Adjusted
Adjusted Profit/(Loss) per share is calculated by dividing the Profit/(Loss) attributable to equity holders of the Company excluding one‐o large non‐recurring items by the weighted average number of ordinary shares in issue during the year. In 2022 the impairment of the investment in Imutex is excluded. In 2021 the net gain on the spin out of the Pilau license asset is excluded.
| | 2022 | 2021 |
| | £'000 | £'000 |
| Losses for the year | (776) | (74) |
| Add back Imutex impairment (2022) / Deduct net gain re Pilau (2021) | 6,957 | (1,190) |
| Adjusted profit/(Loss) for the year | 6,181 | (1,264) |
| Total | 6,181 | (1,264) |
| Weighted average number of Ordinary Shares in issue | 670,943,918 | 670,187,313 |
| Earnings/(loss) per share from operations | 0.92p | (0.19p) |
(c) Diluted Basic
Due to the losses in the periods the eect of the share options and warrants noted below were considered to be anti‐dilutive.
| | 2022 | 2021 |
| Potential dilutive ordinary shares: | | |
| Options | 15,502,029 | 8,393,213 |
| Warrants | 2,264,427 | 2,264,427 |
| Total | 17,766,456 | 10,657,640 |
(d) Diluted Adjusted
Due to adjusted losses in the prior year the eect of the share options and warrants noted above were considered to be anti‐dilutive.
| | 2022 | 2021 |
| | £'000 | £'000 |
| Earning/(loss) per share | 0.90p | (0.19p) |
10. Property, plant and equipment
| | Leasehold | Plant & | Fixtures & | 2022 | 2021 |
| | Improvements | Machinery | Fittings | Total | Total |
| Group | £'000 | £'000 | £'000 | £'000 | £'000 |
| Cost | | | | |
|
| At 1 January 2022 | 842 | 2,507 | 1,111 | 4,460 | 5,770 |
| Additions | 450 | 540 | 286 | 1,276 | 329 |
| Disposals | - | (90) | - | (90) | (1,620) |
| Exchange dierences | - | - | 44 | 44 | (19) |
| At 31 December 2022 | 1,292 | 2,957 | 1,441 | 5,690 | 4,460 |
| Depreciation | | | | |
|
| At 1 January 2022 | 706 | 2,141 | 686 | 3,533 | 4,702 |
| Charge for the year | 333 | 166 | 217 | 716 | 406 |
| Elimination on disposal | - | (90) | - | (90) | (1,555) |
| Exchange dierences | - | - | 18 | 18 | (20) |
| At 31 December 2022 | 1,039 | 2,217 | 921 | 4,177 | 3,533 |
| Net book value | | | | | |
| At 31 December 2022 | 253 | 740 | 520 | 1,513 |
|
| At 31 December 2021 | 136 | 366 | 425 | 927 |
|
The Company had no property, plant and equipment at 31 December 2022 (2021: Nil).
13. Intangible fixed assets
| | | Software | Pref right to | WBS | 2022 | 2021 |
| | Goodwill | development | reserve slot | development | Total | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £.000 |
| Cost | | | | | | |
| At 1 January 2022 | 7,228 | 2,199 | 274 | 411 | 10,112 | 9,701 |
| Additions | - | 87 | - | - | 87 | 411 |
| At 31 December 2022 | 7,228 | 2,286 | 274 | 411 | 10,199 | 10,112 |
| Amortisation | | | | | | |
| At 1 January 2022 | 1,628 | 2,173 | 92 | - | 3,893 | 3,801 |
| Charge for the year | - | 19 | 182 | 82 | 283 | 92 |
| At 31 December 2022 | 1,628 | 2,192 | 274 | 82 | 4,176 | 3,893 |
| Net book value | | | | | | |
| At 31 December 2022 | 5,600 | 94 | - | 329 | 6,023 |
|
| At 31 December 2021 | 5,600 | 26 | 182 | 411 | 6,219 |
Goodwill was allocated to the Group's single cash‐generating unit (CGU) identified according to a single operating segment.
| | 2022 | 2021 |
| | £'000 | £'000 |
| hVIVO Group | 5,600 | 5,600 |
Goodwill is tested for impairment at the Statement of Financial Position date. The recoverable amount of goodwill at 31 December 2022 was assessed at £5,600,000 (2021: £5,600,000) on the basis of value in use. An impairment loss was not recognised as a result of this review.
The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and forecast approved by management for the next two years were used followed by an extrapolation of expected cash flows at a constant growth rate for a further seven years. The projected results were discounted at a rate which is a prudent evaluation of the pre‐tax rate that reflects current market assessments of the time value of money and the risks specific to the cash‐generating units.
The key assumptions used for value in use calculations in 2022 were as follows:
| Longer‐term growth rate (from 2023 onwards) | 7.5% |
| Discount rate | 15% |
The impairment review is prepared on the group basis rather than a single unit basis.
The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the projected results of the Group. The projections and associated headroom used for the group is sensitive to the EBITDA growth assumptions that have been applied.
The Company has no intangible assets.
11a. Investments in subsidiaries
| | 2022 | 2021 |
| Company | £'000 | £'000 |
| Shares in Group undertakings | | |
| At 1 January | 22,377 | 22,334 |
| Transfer of services, knowhow and assets from Venn Life Sciences (VLS) France S.A.S to VLS Biometry Services S.A.S | - | 43 |
| At 31 December | 22,377 | 22,377 |
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid. Following review an impairment provision of Nil (2021: Nil) has been made to the investment in subsidiaries.
VLS Biometry Services S.A.S, a new subsidiary in France, acquired from VLS France S.A.S all of their advisory services and global services to enterprises for the integration of computer, statistics, data management techniques, study design and methodology. The assets sold included the benefit and the liability of all on‐going contracts and agreements in relation with the activity, and the various contracts concluded with the customers and suppliers.
VLS France S.A.S subsequently ceased trading.
The subsidiaries of hVIVO Plc (formerly Open Orphan Plc) are as follows:
| Name of Company | Active/ | 100% direct/ | Country of | Nature of business |
| hVIVO Holdings Limited (formerly hVIVO Limited) | Active | Direct | England & Wales | Intermediate holding company |
| hVIVO Services Limited | Active | Indirect | England & Wales | Viral challenge and related laboratory services |
| hVIVO INC | Active | Indirect | USA | Sales & marketing services |
| Venn Life Sciences ED B.V | Active | Direct | Netherlands | Pre‐clinical & early clinical research services |
| Venn Life Science Biometry Services S.A.S | Active | Direct | France | Data management & statistics services |
| Open Orphan DAC | Active | Direct | Ireland | Group services company |
| Venn Life Sciences Limited | Active | Direct | Ireland | Intermediate holding company |
| Venn Life Sciences (Germany) Gmbh | Dormant | Direct | Germany | Clinical research organisation |
| Venn Life Sciences (France) S.A.S | Dormant | Direct | France | Data management & randomisation systems |
All the subsidiaries are included in the consolidation. The proportions of voting shares held by the parent Company do not dier from the proportion of Ordinary Shares held.
11b. Investments in associates
The group, via its holding in hVIVO Holdings Limited, has investments in two associated companies as follows:
| Name of Company | Country of Registration | Nature of Business |
| Imutex Limited(1) | England & Wales | Clinical development |
| PrEP Biopharm Limited(2) | England & Wales | Clinical development |
(1) hVIVO Holdings Limited owns 49% of the Ordinary Shares and after adjusting for share of loss in 2022 of £48,000. the investment was fully impaired and is valued at Nil at 31 December 2022 (2021: £7,005,000).
(2) hVIVO Holdings Limited owns 62.62% of Ordinary Shares. In 2018 the carrying value was fully impaired so the investment has a value of Nil at 31 December 2022.
12. Inventories
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| Beginning of the year | 659 | 953 | - | - |
| Laboratory and clinical consumables‐movement | 38 | (92) | - | - |
| Virus - movement | (198) | (202) | - | - |
| End of the year | 499 | 659 | - | - |
Inventories expensed in the consolidated Statement of Comprehensive income are shown within direct project and administrative costs. All inventories are carried at the lower of cost or net realisable value in the consolidated statement of financial position. No provision against inventories was required during 2022.
13. Trade and other receivables
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade receivables | 8,276 | 4,774 | - | - |
| Prepayments | 992 | 855 | 346 | 335 |
| Accrued income | 1,505 | 1,008 | - | - |
| Amounts owed by subsidiary undertakings | - | - | 11,280 | 9,356 |
| Other receivables (incl. R& D tax credits) | 2,127 | 2,307 | 10 | 1 |
| Total | 12,900 | 8,944 | 11,636 | 9,692 |
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The majority of the Group's contracts are based on milestone payments and the Group seeks to ensure that contract milestones are timed to result in invoicing occurring in advance where at all possible, prior to the satisfaction of performance obligations. Therefore, projects that are in progress are typically in a deferred income position. However, some smaller contracts are on a time and materials basis and consequently work is undertaken initially and invoiced subsequently, and this gives rise to the accrued income balance noted above. The costs incurred to obtain or fulfil a contract which has been recognised as accrued income have been determined with reference to labour hours incurred to the period end as a percentage of the total estimated labour hours to complete specified performance obligations as stipulated by the relevant contracts. Accrued income is not amortised as it is of a short‐term nature.
Contractual payment terms are typically 30 to 90 days from date of invoice.
The carrying amounts of the Group's trade and other receivables denominated in all currencies were as follows:
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| GBP£ | 9,553 | 6,746 | 632 | 1,467 |
| Euro | 2,066 | 2,198 | 11,004 | 8,225 |
| USD$ | 1,281 | - | - | - |
| Total | 12,900 | 8,944 | 11,636 | 9,692 |
14. Trade and other payables
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade payables | 2,701 | 2,055 | 105 | 306 |
| Amounts due to subsidiary undertakings | - | - | - | 2,761 |
| Social security and other taxes | 738 | 857 | 50 | 13 |
| Other payables | 718 | 436 | - | 2 |
| Accrued expenses | 3,946 | 1,856 | 208 | 120 |
| Deferred income | 20,766 | 13,192 | - | - |
| | 28,869 | 18,396 | 363 | 3,202 |
All balances are due within 1 year.
The Group seeks to ensure that study contract milestones are timed to result in invoicing occurring in advance where at all possible, prior to the satisfaction of performance obligations. Therefore, projects that are in progress are typically in a contract liability position which gives rise to the deferred income balance above. Performance obligations of contracts with customers are satisfied on the delivery of study data to the customer along with a final study report. Due to the nature of the business, there are no warranties or refunds expected or provided for.
The Group is using the practical expedient not to adjust the amount of consideration for the eects of a significant financing component as the period between when the promised services are transferred and when the customer pays for the service is less than twelve months.
15. Borrowings
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| Current - falling due within 1 year | | | | |
| Convertible debenture securities ("CDS") | - | 294 | - | - |
| Total borrowings | - | 294 | - | - |
The Company and Group do not have any borrowings.
As at 31 December 2021, there were 2 remaining CDS holders and they were entitled to interest of 7% per annum on their securities. Neither of these CDS holders chose to convert their securities into Ordinary shares in hVIVO Plc (formerly Open Orphan Plc) at the time of the reverse takeover of the Venn Group in June 2019. Consequently, these CDS holdings were redeemed by Open Orphan DAC at redemption dates in April 2022 and October 2022 respectively.
16. Share capital
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| 671,047,771 (2021 - 670,929,314) Ordinary shares of £0.001 | 671 | 671 | 671 | 671 |
The Company exercised its right in July 2021 to acquire all deferred shares for an aggregate price of £1.
Subsequently, the share capital of hVIVO Plc (formerly Open Orphan Plc) consists only of fully paid ordinary shares. All shares are equally eligible to share in declared dividends, appoint Directors, receive notice of, attend, speak and vote at any general meeting of the Company.
During the year the Company issued 118,457 shares @ £0.02/Share as a result of share options being exercised by former employees.
17. Other reserves
Group and Company
Share premium
Share premium is the dierence between the nominal value of share capital and the actual cash received on fund‐raising less any costs associated with the fund‐raising.
Merger reserve
This includes reverse acquisition reserve which resulted from the reverse takeover of Venn Life Sciences Holdings Plc by Open Orphan DAC on 28 June 2019. Also included is a Group re‐organisation reserve relating to previous re‐organisation of the Venn Group.
Foreign currency reserve
The presentation currency of the Group became GBP£ in 2020. Previously the presentation currency was Euro. This reserve arises from the translation of the opening balances from Euro to GBP£ and also from the translation of the subsidiaries which are denominated in Euro into GBP£ on consolidation.
The Euro denominated subsidiaries are Venn Life Sciences Limited, Venn Life Sciences Germany GmbH, Venn Life Sciences France S.A.S, Venn Life Sciences E.D. B.V., Venn Life Sciences Biometry Services and Open Orphan DAC.
Share based payments reserve
A share option reserve of £151,000 was created in June 2019, prior to the reverse takeover of Venn Life Sciences Holdings PLC by Open Orphan DAC, in relation to the share options and warrants issued in June 2019. After the reverse takeover, further provisions of £102,000 (2019), £240,000 (2020), £27,000 (2021) were made and an additional provision of £284,000 was made in 2022 and expensed to direct project and administration expenses. To date £226,000 has been released from the share based payments reserve back to retained earnings in respect of share options that have since been exercised.
Retained earnings
For the Group and Company, earnings reflect the earnings of hVIVO Plc (formerly Open Orphan Plc).
18. Cash used in operations
| | Group | Group | Company | Company |
| | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| (Loss)/Profit before income tax | (365) | 277 | (1,311) | (1,522) |
| Adjustments for: | | | | |
| - Depreciation and amortisation | 2,930 | 2,565 | - | - |
| - Exceptional Items | 119 | (267) | - | 409 |
| - Impairment of associate | 6,957 | - | - | - |
| - Net (gain)/loss on disposals of PPE | (12) | 189 | - | - |
| - Net finance (Income)/costs | (617) | 215 | (834) | (768) |
| - Share based payment charge | 284 | 27 | - | - |
| - R & D Credit incl. in other income | (1,851) | (1,842) | - | - |
| - Share of Imutex loss | 48 | 71 | - | - |
| Changes in working capital | | | | |
| Impairments on intercompany balances | - | - | 282 | 485 |
| - (Increase)/Decrease trade and other receivables | (4,309) | 904 | (1,135) | (241) |
| - Decrease inventories | 172 | 294 | - | - |
| - Increase/(Decrease) trade and other payables | 11,152 | (2,972) | (2,890) | 2,317 |
| Net cash generated/(used) in operations | 14,508 | (539) | (5,888) | 680 |
25. Related Party Disclosures
Directors
Directors' emoluments are set out in the Report of the Remuneration Committee Report.
Key management compensation for the year was as follows:
| | 2022 | 2021 |
| | €'000 | €'000 |
| Aggregate emoluments | 994 | 526 |
| Employer contribution to pension scheme | 42 | 17 |
| | 1,036 | 543 |
Report of the Key management includes the Directors only.
Group
Non‐Executive Group Chairman, Cathal Friel, is a Director of Raglan Road Capital group companies which has provided advisory and oce related services to Open Orphan DAC (2022 charge €9,798; 2021 charge €23,175). The balance owed by Open Orphan DAC to Raglan Road Capital group companies at year end 2022 was €2,000 (2021: €16,901).
There were no other related party transactions during the year.
The Company
During the year the Company absorbed net management charges of £141,598 (2021 - £109,547) from its subsidiaries. At 31 December 2022 the Company was owed £11,280,000 (2021 - £6,594,000) by its subsidiaries.
19. Discontinued operations
Venn Life Sciences (NI) Ltd, Venn Life Sciences B.V. and Venn Life Sciences Germany GmbH ceased to trade from 1 January 2021 onwards. Venn Life Sciences (NI) Ltd and Venn Life Sciences B.V. were dissolved in 2022. Venn Life Sciences Germany GmbH commenced a liquidation process in early 2022 and that is expected to conclude in early 2023. There were no new discontinued operations during 2022.
20. Share options and warrants
Share options
The Group has various share option plans under which it has granted share options to certain Directors and senior management of the Group.
The number of outstanding share options remaining at 31 December 2022 are as follows:
| | Exercise | Date | # Options at | # of Options | # of Options | # Options at |
| Date of Issue | Price | of Expiry | 01/01/2022 | Exercised | Granted | 31/12/2022 |
| 2015 | 13p | 2025 | 280,000 | - | - | 280,000 |
| 2019 | 5.6p | 2024 | 7,716,964 | - | - | 7,716,964 |
| 2020 | 2p | 2024 | 396,249 | (118,457) | - | 277,792 |
| 2022 | 0.1p | 2025 | - | - | 7,227,273 | 7,227,273 |
| | | | 8,393,213 | (118,457) | 7,227,273 | 15,502,029 |
The weighted‐average exercise price of all options outstanding at year end is 3.1p and the weighted‐average remaining contractual life is 1.8 years.
Share based payment charge for the year was £284,000 included in direct project and administration costs (2021 - £27,000). The only new share options granted during the year relate to the implementation of a Long‐Term Incentive Plan ("LTIP"). A reserve of £250,000 has been created in 2022 in respect of this award. The following key assumptions were factored into the model when valuing these options at the date of grant:
- expected volatility of 74%
- option life of 3 years
- expected dividends yield of 0%
- risk‐free interest rate of 0.72%
An additional £33,000 charge has been created in relation to the vesting of shares under the existing SIP scheme.
Due to share options being exercised during the year £33,000 (2021: £193,000) of the existing share‐based payment reserve was released back to retained earnings.
The Company has used the Black Scholes model to value the options at 31 December 2022 and 31 December 2021.
Warrants
2,264,427 warrants existed at 31 December 2022 (2021: 2,264,427).
232,696 warrants were granted on 11 December 2018 and are exercisable from the date of grant to 10 December 2023. The exercise price is 0.1p per ordinary share under warrant. 424,589 warrants were granted on 11 December 2018 and are exercisable from the date of grant to 10 December 2023. The exercise price is 2.2p per ordinary share under warrant.
1,607,142 warrants were granted on 28 June 2019 and are exercisable from the date of grant to 27 June 2024. The exercise price is 5.6p per ordinary share under warrant.
21. Other operating income
Other operating income represents government grants received to fund research and development activities around the group.
| | | 2022 | 2021 |
| | | £'000 | £'000 |
| hVIVO | Gross RDEC credit | 1,851 | 1,842 |
| Venn | R & D related credits | 369 | 299 |
| Total | | 2,220 | 2,141 |
The subsidiary, hVIVO Services Limited, can claim UK R&D incentives under both the RDEC scheme (noted above) and the SME scheme (when the Company is loss making). Venn Life Sciences Biometry services S.A.S. can claim Credit Tax Research ('CIR') payments in France and Venn Life Sciences ED B.V. can claim R & D credits against payroll taxes in the Netherlands.
21. Post reporting period date events
The following events have taken place since the year end:
a) The Directors propose a special, one o dividend of 0.45 pence per share. The payment is subject to approval by shareholders at the Company's Annual General Meeting on 23 May 2023.
b) On 28 March 2023 the Company issued 7,716,964 shares @ £0.056/Share as a result of share options being exercised by a former employee.
c) hVIVO Holdings Limited owns 62.62% of PrEP Biopharm Limited. In 2018 the carrying value was fully impaired so the investment has a value of Nil at 31 December 2022. The Directors of PrEP Biopharm have made a decision to commence the process of a solvent liquidation. The liquidation is expected to complete in 2023.
22. Pensions
The Group operates a number of defined contribution pension schemes whose assets are held in independently administered funds. The pension charge represents contributions payable by the Group and amounted to £904,000 for the year (2021: £872,000). Contributions of £98,000 were payable to the funds at the year end and are included within trade and other payables (2021: £79,000).
23. Leases
Amounts recognised in the Statement of Financial Position
| | Right of use assets | Lease liabilities | |||
| | |||||
| | 2022 £'000 | 2021 £,000 | 2022 £'000 | 2021 £,000 |
|
| As at 1 January | 2,788 | 4,230 | 2,854 | 4,439 |
|
| New leases acquired | 740 | 1,399 | 739 | 1,399 |
|
| Leases exited | (8) | (738) | (20) | (816) |
|
| Depreciation expense | (1,931) | (2,039) | - | - |
|
| Interest expense | - | - | 133 | 227 |
|
| Payments | - | - | (2,178) | (2,329) |
|
| Exchange dierences | 21 | (64) | 35 | (66) |
|
| As at 31 December | 1,610 | 2,788 | 1,563 | 2,854 |
|
| Current | - | - | 826 | 1,991 |
|
| Non‐current | 1,610 | 2,788 | 737 | 863 |
|
Maturity of lease liabilities
| | 31 December | 31 December |
| | 2022 | 2021 |
| | £'000 | £.000 |
| Current - Within one year | 826 | 1,991 |
| Non‐current - Between one to two years | 271 | 477 |
| Non‐current - Between two to five years | 466 | 386 |
| | 1,563 | 2,854 |
Short‐term lease payments expensed during year ended 31 December 2022: £47,000 (2021: £32,000 (re‐stated)).
24. Leasehold provision
Leasehold provision relates to dilapidation.
| | Leasehold |
| | provision |
| | £'000 |
| As at 1 January 2022 | - |
| Addition | 730 |
| As at 31 December 2022 | 730 |
| Current | 70 |
| Non‐current | 670 |
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