3rd Mar 2009 07:00
Embargoed Release: 07:00hrs, Tuesday 3 March 2009
SAGENTIA GROUP PLC
('Sagentia' or the 'Group')
Annual Report and Financial Statements 2008
PART 2
Notes to the Financial Statements
For the year ended 31 December 2008
1 General information
Sagentia Group plc (the 'Sagentia' or 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is a leading international technology consulting and IP exploitation organisation with a reputation for successfully commercialising emerging science and technology. Sagentia creates, develops and delivers business opportunities, products and services for its clients.
The Company is the ultimate parent company in which results of all Sagentia companies are consolidated. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. To date it has acquired 99.6% of Sagentia Group AG via a share for share exchange.
Sagentia develops technologies that underpin the future of the widest range of industries. Its key areas of expertise include: engineering, materials, telecommunications, life sciences, business innovation and electronics. Sagentia's facilities include state-of-the-art laboratories located in Europe in Cambridge, Frankfurt, and Stockholm; in the US in Washington, and in Asia in Hong Kong.
The group and company accounts of Sagentia Group plc were prepared under IFRS and have been audited by Grant Thornton UK LLP. Accounts are available from the company's registered office; Harston Mill Harston, Cambridge, CB22 7GG.
The Company is incorporated in England and Wales and has its primary listing on the Alternative Investment Market of the London Stock Exchange (SAG.L)
These consolidated financial statements have been approved for issue by the Board of Directors on 2 March 2009.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of Sagentia have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and IFRIC interpretations issued and effective at the time of preparing these statements. No profit and loss account is presented for Sagentia Group plc as provided by Section 230 of the Companies Act 1985. The company's loss for the financial period after tax, determined in accordance with the Act, was £634,000 (2007 - £Nil).
Acquisition of Sagentia Group AG by Sagentia Group plc
These statements consolidate the financial statements of Sagentia Group plc and its subsidiary undertakings drawn up to 31 December each year. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. For the purpose of preparing the consolidated accounts this transaction is not considered to be a business combination. Thus, the directors have treated the results and cash flows of the combined entities brought into the consolidated financial statements of Sagentia Group plc, restating comparative results, as though they had always been combined. The comparative balance sheet at 31 December 2007 is as the position of Sagentia Group AG, except that the share capital, share premium and reserve accounts have been restated to create a merger reserve, to reflect the position assuming the share for share exchange had occurred at this date. The merger reserve shown within the Company accounts is the difference between the market value of the shares acquired and the nominal value of the shares issued. The merger reserve shown within the Group accounts is the difference between the net asset value of the assets acquired and the nominal value of the shares issued
The company-only results of Sagentia Group plc are for the period from 17 March 2008 to 31Decmber 2008 only.
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial instruments at fair value, as allowed by IAS39 Financial Instruments: Recognition and Measurement. Of the new Standards and Interpretations effective for the year ended 31 December 2008, listed below, there was no impact on the presentation of the financial statements of Sagentia Group plc.
|
Number |
Title |
|
|
IFRIC 11 |
IFRS2: Group and treasury share transactions |
|
|
IFRS 12 |
Service Concession Arrangements |
|
|
IFRIC 14 |
Defined Benefit Asset and Minimum Funding Requirements |
The Standards and Interpretations in issue but not yet effective for the year ending 31 December 2008 are listed below. Sagentia has not adopted these early. Other than additional disclosure, it is not thought that there will be an impact on the preparation of the accounts of Sagentia on the adoption of these standards.
|
Number |
Title |
Effective |
|
IAS 1 |
Presentation of Financial Statements (revised 2007) - Statement of Changes in Equity will no longer be presented as a primary statement |
1 January 2009 |
|
IAS 23 |
Borrowing Costs (revised 2007) |
1 January 2009 |
|
IAS 32 (Amendment) |
Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation |
1 January 2009 |
|
IAS 27 |
Consolidated and Separate Financial Statements (Revised 2008) |
1 July 2009 |
|
IFRS 2 (Amendment) |
Share-based Payment - Vesting Conditions and Cancellations |
1 January 2009 |
|
IFRS 1 (Amendment) |
First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate |
1 January 2009 |
|
IAS 39 (Amendment) |
Financial Instruments: Recognition and Measurement- Eligible Hedged Items |
1 July 2009 |
|
IFRS 3 |
Business Combinations (Revised 2008) |
1 July 2009 |
|
IFRS 8 |
Operating Segments |
1 January 2009 |
|
IFRIC 13 |
Customer Loyalty Programmes |
1 July 2008 |
|
IFRIC 15 |
Agreements for the Construction of Real Estate |
1 January 2009 |
|
IFRIC 16 |
Hedges of a Net Investment in a Foreign Operation |
1 October 2008 |
|
IFRIC 17 |
Distributions of Non-cash Assets to Owners |
1 July 2009 |
|
IFRIC 18 |
Transfers of Assets from Customers |
From 1 July 2009 |
IAS 1, Presentation of Financial Statements (Revised 2007) will result in changes to the presentation of Sagentia's financial statements as the format currently adopted for the Statement of Changes in Equity will no longer be permitted. Instead, Sagentia will present a Statement of Comprehensive Income combining the existing Income Statement with other income and expenses currently presented as part of the Statement of Changes in Equity. In addition, Sagentia will present a separate Statement of Changes in Equity showing owner changes in equity.
IAS 23 Borrowing Costs (Revised 2008) requires that borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of the asset. The standard must be applied for accounting periods beginning on or after 1 January 2009. Sagentia's current accounting policy is to recognise borrowing costs in the income statement as incurred. Where Sagentia has funded the acquisition or construction of property, plant and equipment through borrowings, application of the standard is expected to increase the cost of the asset and the depreciation charge and reduce finance costs.
IFRS 3 Business Combinations (Revised 2009) will apply to any future business combinations that Sagentia may undertake once it is in force. Sagentia has no plans to adopt the revised standard in advance of its mandatory implementation date and it is not possible to quantify the effect of the standard on future business combinations until those combinations take place.
The other standards and interpretations are not expected to have any significant impact on Sagentia's financial statements, in their periods of initial application, except for the additional disclosures on operating segments when IFRS 8 Operating Segments comes into effect.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying Sagentia's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 24.
2.2 Basis of consolidation The consolidated financial statements of Sagentia have been prepared in conformity with International Financial Reporting Standards ("IFRS") as adopted by the EU.
Sagentia financial statements consolidate the financial statements of Sagentia Group plc and its subsidiary undertakings drawn up to 31 December each year. Sagentia Group AG was incorporated in 1996 under the name of Catella AG and in 1998 changed its name to The Generics Group AG; and in 2007 changed its name to Sagentia Group AG. Sagentia Group AG, as part of a group reorganisation, became the parent of The Generics Group Ltd (now Sagentia Holdings Ltd) in 1998 via a share-for-share exchange in that company. The company, as part of a group rebranding exercise, changed its name again during 2006 to Sagentia Group AG. This combination qualified as a group reconstruction. Thus the results and cash flows of the combined entities were brought into the financial statements of the combined entity as though they had always been combined. In March 2008 Sagentia Group plc was incorporated in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. See Acquisition of Sagentia Group AG by Sagentia Group plc in section 2.1.
The basis of consolidation is set out below:
Subsidiaries - Subsidiaries are entities over which Sagentia has the power to govern the financial and operating policies accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Sagentia controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to Sagentia. They are de-consolidated from the date that control ceases. These acquisitions are accounted for using the purchase method of accounting.
Venture subsidiaries - Venture subsidiaries are investments in which Sagentia holds control, but holds these investments for ultimate disposal and capital gain. Sagentia accounts for such investments as subsidiaries until either they are disposed of or Sagentia issues shares to minorities and allows control to pass.
Investments - Investments are investments in which Sagentia does not hold significant influence. Where Sagentia holds these investments for ultimate disposal and capital gain, they are accounted for in accordance with IAS39, and are designated as at fair value through profit and loss.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments.
2.4 Intangible assets
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by Sagentia, and that will probably generate economic benefit greater than one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.
Computer software development costs recognised as assets (see 2.7 re requirements of internally developed software) are amortised over their useful lives (not exceeding three years).
2.5 Research expenditure
Research expenditure is written off as incurred.
2.6 Development expenditure
Development expenditure is also written off as incurred, except where the Directors are satisfied that the technical, commercial and financial viability of individual project's criteria are met that would allow such costs to be capitalised. Sagentia recognises an intangible asset if it believes it can demonstrate the following:
- The technical feasibility of completing the intangible asset so that it will be available for use or sale.
- Its ability to complete and use or sell the intangible asset.
- How the intangible asset will generate probable future economic benefits; either by the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
- The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
- Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Identifiable expenditure is then capitalised and amortised over the period during which benefits are expected (3-5 years).
2.7 Property, plant and equipment
Land and buildings as shown in the notes to the accounts comprise offices and laboratories at Harston Mill, Harston, Cambridge, UK. Land and buildings are shown at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefit associated with the item will flow to Sagentia and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost less their residual values over their estimated useful lives, as follows:
Buildings 25 years
Furniture and fittings 3-10 years Equipment 3-4 years
The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount, when an indicator of impairment is identified, in accordance with the policy note 2.5.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.
2.8 Investments
Sagentia classifies its investments that are not controlled investments as equity investments at fair value through profit or loss. Initial recognition is at fair value, with transaction costs expensed.
Fair value through profit or loss investments that are not controlled investments are shown on the balance sheet at their fair value and any associated changes in fair value are included in the income statement in the period they arise.
Valuation policy - In determining fair value, investments have been valued by the Directors in compliance with the principles of the International Private Equity and Venture Capital Guidelines, updated and effective 1 January 2005, as recommended by the British Venture Capital Association (BVCA).
Listed investments - the fair values of quoted investments are based on bid prices at the balance sheet date.
Unlisted investments - the valuation methodology used most commonly by Sagentia is the "price of recent investment", reflecting the early stage nature of the investments.
The following considerations are used when calculating the fair value using the "price of recent investment" guidelines:
Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value; and
Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation.
Controlled investments - Sagentia also undertake investment activities in investments that are controlled, the performance of which, therefore, cannot be measured by changes in fair value arising from the investment activity of Sagentia. Sagentia identify these activities separately as Venture Subsidiaries, and such investments are consolidated, in accordance with Sagentia's policy on consolidation.
2.9 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that Sagentia will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.
2.10 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
2.11 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless Sagentia has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
2.12 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share capital (Treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes,) is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and are included in equity attributable to the Company's equity holders.
Sagentia also has an Employee Share Ownership Trust (ESOT) for assisting with the obligations under share option and other employee remuneration schemes. The ESOT is consolidated as if it were a subsidiary. Shares in Sagentia held by the ESOT are stated at cost and presented in the balance sheet as a deduction from equity under the heading of Investment in Own Shares. Finance and administration costs relating to the ESOT are charged to operating costs.
2.13 Revenue recognition
Group revenue is measured at the fair value of consideration received or receivable by the Group and comprises the value of sales (excluding VAT) of services provided in the normal course of business. Sagentia revenue recognition policies by revenue type are as follows:
Consulting revenues are recognised in proportion to the stage of completion of each project. The stage of completion takes into account the milestones achieved in relation to the project deliverables. Any success elements of consultancy revenues are recognised in the period when believed to be relatively certain and attributable.
Licence and royalty income is recognised in the related period in line with the contract.
Share of manufacturer's margin - income recognised in the related period in line with the agreement.
Management fees (and any carried interest income) relating to the provision of investment management services are recognised when earned. Management fees are typically a percentage of funds under management.
Rental income from leases over property held is recognised in the related period in line with the lease agreement.
2.14 Long-term contracts
Amounts recoverable on long-term contracts, which are included in trade receivables, are stated at the value of the work done less amounts received as progress payments on account. Work done is calculated based on proportion of time spent on the project or value of stage gates achieved as set out in the project. Progress payments in excess of work done are included in payables as payments on account.
2.15 Foreign currency
(a) Functional and presentation currency
Items included in the financial statements of each of Sagentia'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 sterling, which is the Company's functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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 income statement.
In respect of translation differences on non-monetary items, items held at cost are translated at the exchange rate at the date of transaction and items held at fair value are translated at the exchange rate when the fair value was determined.
(c) Group companies
The results and financial position of all Sagentia entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows'.
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity. When a foreign operation is sold, such exchange differences are recognised in the income statement 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.
2.16 Employee benefits
(a) Pension obligations
Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies based on a percentage of salary earned, currently ranging between 0% and 20%, or trustee-administered funds determined by periodic actuarial calculations. Sagentia has defined contribution plans. A defined contribution plan is a pension plan under which Sagentia pays fixed contributions into a separate entity. Sagentia has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
For defined contribution plans, Sagentia pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Sagentia has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Share-based compensation
Sagentia operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, as calculated using the Black-Scholes option- pricing method, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
Sagentia has elected to apply the share based payment exemption. It applied IFRS 2 from 1 January 2004 to those options that were issued after 7 November 2002 but that had not vested by 1 January 2005.
(c) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Sagentia recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.
(d) Profit-sharing and bonus plans
Sagentia recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. Sagentia recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation
2.17 Deferred income tax
Deferred income tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from goodwill, the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Sagentia and it is probable that the temporary difference will not reverse in the foreseeable future.
2.18 Income Tax
Income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws of the relevant countries that have been enacted or substantively enacted by the balance sheet date.
2.19 Leases
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. Leases of land and buildings are split into land and buildings elements according to the relative fair values of the leasehold interests at the date the asset is initially recognised.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.
All other leases are treated as operating leases and are charged on a straightߛline basis over the lease term, even if payments are not made on such a basis.
Income from property leases is recognised in the related period in line with the lease agreement.
2.20 Capitalisation of borrowing costs and interest
Finance costs of debt are recognised in the profit and loss account over the term of such instruments at a constant rate on the carrying amount. Finance costs which are directly attributable to the construction of qualifying assets are capitalised as part of the cost of those assets. The commencement of capitalisation begins when both finance costs and expenditures for the asset are being incurred and activities that are necessary to get the asset ready for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete.
2.21 Financial instruments
Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated by the entity to be carried at fair value through profit or loss upon initial recognition. By definition, all derivative financial instruments that do not qualify for hedge accounting fall into this category. However, no other type of Sagentia's financial instruments currently falls into this category.
Any gain or loss arising from derivative financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using a valuation technique where no active market exists.
3 Financial risk management
3.1 Financial risk factors
Sagentia's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. Sagentia's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Sagentia's financial performance. Sagentia uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with Sagentia's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest-rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investing excess liquidity.
(a) Foreign currency sensitivity
Sagentia operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Euro and Hong Kong dollar. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.
To manage their foreign exchange risk arising from commercial transactions, recognised assets and liabilities, entities in Sagentia use forward contracts, transacted with Group Treasury. Foreign exchange risk arises when commercial transactions, recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. Group Treasury is responsible for managing the net position in each foreign currency by using external forward currency contracts. There were no forward currency contracts at the year end.
Sagentia's risk management policy is to hedge anticipated transactions when there is certainty of receipt of funds.
Sagentia has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of Sagentia's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows.
|
2008 £000 |
US$ |
Euro |
HK$ |
Swedish Krona |
Other |
|
Financial assets |
1,528 |
972 |
155 |
285 |
7,825 |
|
Financial liabilities |
(33) |
(16) |
(59) |
(133) |
(1,631) |
|
Short-term exposure |
1,495 |
956 |
96 |
152 |
6,194 |
|
Financial assets |
- |
- |
- |
- |
5,291 |
|
Financial liabilities |
- |
- |
- |
(73) |
(9,846) |
|
Long-term exposure |
- |
- |
- |
(73) |
(4,555) |
|
2007 £000 |
US$ |
Euro |
HK$ |
Swedish Krona |
Other |
|
Financial assets |
911 |
523 |
284 |
144 |
5,180 |
|
Financial liabilities |
(17) |
(51) |
(44) |
(93) |
(1,439) |
|
Short-term exposure |
894 |
472 |
240 |
51 |
3,741 |
|
Financial assets |
17 |
- |
- |
- |
7,553 |
|
Financial liabilities |
- |
- |
(10) |
(65) |
(7,368) |
|
Long-term exposure |
17 |
- |
(10) |
(65) |
185 |
The following table illustrates the sensitivity of the net movement on reserves and equity in regards to Sagentia's financial assets and financial liabilities and the US dollar/GBP exchange rate, Euro/GBP exchange rate and Hong Kong dollar/GBP exchange rate. It assumes a +/- 25% change of the GBP / US dollar exchange rate for the year ended at 31 December 2008 (2007: 5%). A +/- 20% change is considered for the GBP / Euro exchange rate (2007: 10%). A +/- 20% change is considered for the GBP / Hong Kong dollar exchange rate (2007: 5%). Each of these percentages has been determined based on the month on month volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on Sagentia's foreign currency financial instruments held at each balance sheet date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.
If the GBP had strengthened against the US dollar, Euro and Hong Kong dollar by 25% (2007: 5%), 20% (2007: 10%) and 20% (2007: 5%) respectively then this would have had the following impact:
|
2008 £000 |
US$ |
Euro |
HK$ |
Total |
|
Profit and loss |
(374) |
(191) |
(19) |
(584) |
|
Equity |
(374) |
(191) |
(19) |
(584) |
If the GBP had weakened against the US dollar, Euro and Hong Kong dollar by 25% (2007: 5%), 20% (2007: 10%) and 10% (2007: 20%) respectively then this would have had the following impact:
|
2008 £000 |
US$ |
Euro |
HK$ |
Total |
|
Profit and loss |
374 |
191 |
19 |
584 |
|
Equity |
374 |
191 |
19 |
584 |
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of Sagentia's exposure to currency risk.
(b) Interest rate sensitivity
Sagentia's policy is to minimise interest rate cash flow exposures on long term financing. Longer term borrowings are therefore usually at fixed rates. At 31 December 2008, Sagentia is exposed to changes in market interest rates through its short term bank borrowings, which are subject to variable interest rates - see note 20 for further information.
Sagentia manages its longer term cash flow interest-rate risk by using floating-to-fixed interest-rate swaps. Such interest-rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, Sagentia raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if Sagentia borrowed at fixed rates directly. Under the interest-rate swaps, Sagentia agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.
Sagentia's bank borrowings and their interest rate profile are as follows:
|
2008 £000 |
2007 £000 |
|||
|
Sterling - bank loan |
9,000 |
7,578 |
||
|
Swedish Krona - bank loan |
113 |
58 |
||
|
9,113 |
7,636 |
|||
|
Weighted average interest rate |
% |
% |
||
|
Sterling - fixed rate bank loan |
7.1 |
7.1 |
||
|
Sterling - floating rate bank loan |
Base+0.8% |
Base+0.8% |
||
|
Swedish Krona - floating rate bank loan |
5.5 |
5.5 |
For benchmark rates of interest, Sagentia refers to both the LIBOR and EUROBOR rates.
The bank loans are secured via a fixed charge over assets of Sagentia and are repayable as disclosed in Note 20.
Terms and conditions of the interest rate swap are as disclosed in Note 18
The following table illustrates the sensitivity of the net result for the year and equity to a reasonably possible change in interest rates of +1.0% and -1.0% (2007: +/- 0.5%), with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on Sagentia's financial instruments held at each balance sheet date. All other variables are held constant.
|
2008 £000 |
2008 £000 |
2007 £000 |
2007 £000 |
|
|
+1.0% |
-1.0% |
+0.5% |
-0.5% |
|
|
Net result for the year |
(45) |
45 |
(12) |
12 |
|
Equity |
(45) |
45 |
(12) |
12 |
(c) Price risk
Sagentia is exposed to other price risk in respect of its listed equity securities, and the participation in CMR Fuel Cells plc. Sagentia's sensitivity to price risk in regards to its participation in CMR Fuel Cells plc cannot be reliably determined due to numerous uncertainties regarding the future development of the company.
Sagentia holds 2,234,540 shares (2007 - 2,234,540 shares) in CMR Fuel Cells plc. If the share price moves by +/- 1p then Sagentia's investment at fair value moves by +/- £22,345.
Any investments in listed equity securities are considered long-term, strategic investments. In accordance with Sagentia's policies, no specific hedging activities are undertaken in relation to these investments. The investments are continuously monitored and voting rights arising from these equity instruments are utilised in Sagentia's favour.
(d) Credit risk analysis
Sagentia has no significant concentrations of credit risk. It has policies in place to ensure that sales are made to clients with an appropriate credit history. Derivative counterparties and cash transactions are limited to high-credit-quality financial institutions. Sagentia has policies that limit the amount of credit exposure to any financial institution.
Sagentia's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:
|
2008 £000 |
2007 £000 |
|||
|
Classes of financial assets - carrying amounts |
||||
|
-Loans and receivables - non current assets |
1,200 |
1,678 |
||
|
Designated at fair value through profit and loss |
||||
|
-equity investments |
4,091 |
5,892 |
||
|
Cash and cash equivalents |
5,341 |
859 |
||
|
Trade and other receivables |
5,425 |
6,183 |
||
|
16,057 |
14,612 |
Sagentia continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and / or reports on customers and other counterparties are obtained and used. Sagentia's policy is to deal only with creditworthy counterparties.
Sagentia's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.
None of Sagentia's financial assets are secured by collateral or other credit enhancements.
In respect of trade and other receivables, Sagentia is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
(e) Liquidity risk analysis
Sagentia manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored on a weekly and monthly basis. Long-term liquidity needs for a quarterly and semi-annual period are reviewed monthly.
Sagentia maintains cash to meet its liquidity requirements in interest bearing current accounts. Funding for long-term liquidity needs is secured by committed credit facilities.
As at 31 December 2008, Sagentia's liabilities have contractual maturities which are summarised below:
|
2008 |
Current |
Non-current |
||
|
Within |
6 months |
6 to 12 months |
1 to 5 years |
> 5 years |
|
£000 |
£000 |
£000 |
£000 |
|
|
Bank loans |
113 |
- |
9,430 |
- |
|
Trade payables |
1,760 |
- |
- |
- |
|
Derivatives |
- |
- |
489 |
- |
|
1,873 |
- |
9,919 |
- |
|
This compares to the maturity of Sagentia's financial liabilities in the previous reporting period as follows:
|
2007 |
Current |
Non-current |
||
|
Within |
6 months |
6 to 12 months |
1 to 5 years |
> 5 years |
|
£000 |
£000 |
£000 |
£000 |
|
|
Bank loans |
823 |
- |
7,243 |
- |
|
Trade payables |
821 |
- |
- |
- |
|
Derivatives |
- |
- |
200 |
- |
|
1,644 |
- |
7,443 |
- |
|
The above contractual maturities reflect the date of maturation, but exclude interest and interest payable and so reflect the carrying values of the liabilities at the balance sheet date.
(f) Summary of financial assets and liabilities by category
The carrying amounts of Sagentia's financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review may also be categorised as follows.
|
Company |
Group |
||||
|
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
||
|
Non-current assets |
|||||
|
Loans and receivables |
- |
- |
1,200 |
1,678 |
|
|
Designated at fair value through profit and loss - equity investments |
10,510 |
- |
4,091 |
5,892 |
|
|
10,510 |
- |
5,291 |
7,570 |
||
|
Current assets |
|||||
|
Trade and other receivables: |
|||||
|
- trade receivables |
- |
- |
5,425 |
6,183 |
|
|
Cash and cash equivalents |
- |
- |
5,341 |
859 |
|
|
- |
- |
10,766 |
7,042 |
||
|
Non current liabilities |
|||||
|
Borrowings: |
|||||
|
- Other financial liabilities at amortised cost |
- |
- |
9,430 |
7,243 |
|
|
Derivative financial instruments: |
|||||
|
- Financial liabilities held for trading (carried at fair value |
|||||
|
through profit and loss) |
- |
- |
489 |
200 |
|
|
- |
- |
9,919 |
7,443 |
||
|
Current liabilities |
|||||
|
Borrowings: |
|||||
|
- Financial liabilities at amortised cost |
1 |
- |
113 |
823 |
|
|
Amounts due to Group undertakings |
496 |
- |
- |
- |
|
|
Trade payables: |
|||||
|
- Financial liabilities measured at amortised cost |
23 |
- |
1,760 |
821 |
|
|
520 |
- |
1,873 |
1,644 |
||
3.2 Fair value estimation
(a) Financial instruments
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by Sagentia is the current bid price. Non quoted financial assets are valued using BVCA methodology.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Sagentia uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Techniques, such as estimated discounted cash flows, are used to determine fair value for non-traded financial instruments.
(b) Interest rate-swaps
The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows.
(c) Trade receivables and payables
Trade receivables and payables are valued at amortised cost; where the amount payable or receivable plus cost of credit is assumed to approximate their fair value.
4 Segment information
Primary reporting format - business segments
On 31 December 2008, Sagentia was organised on a worldwide basis into four main business segments:
|
Year ended 31 December 2008 |
Consulting and IP exploitation £000 |
Venture subsidiaries £000 |
Asset management £000 |
Property and central services £000 |
Total £000 |
|
Fees |
22,351 |
44 |
214 |
3,329 |
25,938 |
|
Recharged project expenses |
4,005 |
- |
- |
429 |
4,434 |
|
Licence / royalty income |
254 |
- |
- |
- |
254 |
|
Less: Inter company trading |
(41) |
- |
- |
(1,514) |
(1,555) |
|
Revenue |
26,569 |
44 |
214 |
2,244 |
29,071 |
|
Expenses |
(20,664) |
(1,027) |
(216) |
(2,945) |
(24,852) |
|
Recharged project expenses |
(4,005) |
- |
- |
(429) |
(4,434) |
|
Less: Inter company trading |
41 |
- |
- |
1,514 |
1,555 |
|
Expenses |
(24,628) |
(1,027) |
(216) |
(1,860) |
(27,731) |
|
Gross profit (loss) |
1,941 |
(983) |
(2) |
384 |
1,340 |
|
Profit on disposal of investments |
- |
- |
- |
- |
- |
|
Change in fair value of financial assets |
- |
- |
(1,982) |
- |
(1,982) |
|
Redomiciliation costs |
- |
- |
- |
(589) |
(589) |
|
Cost of options |
(146) |
- |
- |
(24) |
(170) |
|
Operating profit (loss) |
1,795 |
(983) |
(1,984) |
(229) |
(1,401) |
|
Finance charges |
(809) |
||||
|
Loss before income tax |
(2,210) |
||||
|
Tax income |
123 |
||||
|
Loss for the year |
(2,087) |
||||
|
Balance sheet analysis |
|||||
|
Intangible assets |
14 |
- |
- |
- |
14 |
|
-Amortisation |
(13) |
- |
- |
- |
(13) |
|
Property, plant and equipment |
4,511 |
283 |
- |
16,731 |
21,525 |
|
-Depreciation |
(3,819) |
(10) |
- |
(2,688) |
(6,517) |
|
693 |
273 |
- |
14,043 |
15,009 |
|
|
Investments |
- |
- |
5,291 |
- |
5,291 |
|
Deferred income tax assets |
- |
- |
- |
2,633 |
2,633 |
|
Current assets (excluding cash) |
6,467 |
83 |
- |
298 |
6,848 |
|
Cash and cash equivalents |
3,887 |
567 |
- |
887 |
5,341 |
|
Total assets |
11,047 |
923 |
5,291 |
17,861 |
35,122 |
|
Total liabilities |
6,282 |
658 |
- |
13,239 |
20,179 |
|
Total equity |
4,765 |
265 |
5,291 |
4,622 |
14,943 |
|
Total equity and liabilities |
11,047 |
923 |
5,291 |
17,861 |
35,122 |
On 31 December 2007, Sagentia was organised on a worldwide basis into four main business segments:
|
Year ended 31 December 2007 |
Consulting and IP exploitation £000 |
Venture subsidiaries £000 |
Asset management £000 |
Property and central services £000 |
Total £000 |
|
Fees |
17,852 |
169 |
689 |
2,621 |
21,331 |
|
Recharged project expenses |
2,737 |
- |
- |
- |
2,737 |
|
Licence / royalty income |
387 |
- |
- |
- |
387 |
|
Less: Inter company trading |
(50) |
- |
(226) |
(1,217) |
(1,493) |
|
Revenue |
20,926 |
169 |
463 |
1,404 |
22,962 |
|
Expenses |
(17,699) |
(1,559) |
(634) |
(2,574) |
(22,466) |
|
Recharged project expenses |
(2,737) |
- |
- |
- |
(2,737) |
|
Less: Inter company trading |
50 |
- |
226 |
1,217 |
1,493 |
|
Expenses |
(20,386) |
(1,559) |
(408) |
(1,357) |
(23,710) |
|
Gross (loss) profit |
540 |
(1,390) |
55 |
47 |
(748) |
|
Profit on disposal of investments |
- |
- |
1,376 |
- |
1,376 |
|
Change in fair value of financial assets |
- |
- |
(3,701) |
- |
(3,701) |
|
Bonus accrual |
- |
- |
327 |
- |
327 |
|
Cost of options |
(67) |
- |
(7) |
(9) |
(83) |
|
Operating loss |
473 |
(1,390) |
(1,950) |
38 |
(2,829) |
|
Finance charges |
(485) |
||||
|
Loss before income tax |
(3,314) |
||||
|
Tax income |
80 |
||||
|
Loss for the year |
(3,234) |
||||
|
Balance sheet analysis (restated) |
|||||
|
Intangible assets |
14 |
- |
- |
- |
14 |
|
-Amortisation |
(9) |
- |
- |
- |
(9) |
|
Property, plant and equipment |
4,441 |
44 |
16 |
16,724 |
21,225 |
|
-Depreciation |
(3,999) |
(44) |
(16) |
(2,592) |
(6,651) |
|
447 |
- |
- |
14,132 |
14,579 |
|
|
Investments |
- |
- |
7,570 |
- |
7,570 |
|
Deferred income tax assets |
- |
- |
- |
2,657 |
2,657 |
|
Current assets (excluding cash) |
7,460 |
39 |
(1,588) |
1,881 |
7,792 |
|
Cash and cash equivalents |
(169) |
1 |
201 |
826 |
859 |
|
Total assets |
7,738 |
40 |
6,183 |
19,496 |
33,457 |
|
Total liabilities |
5,661 |
14 |
2 |
10,242 |
15,919 |
|
Total equity |
2,077 |
26 |
6,181 |
9,254 |
17,538 |
|
Total equity and liabilities |
7,738 |
40 |
6,183 |
19,496 |
33,457 |
Capital expenditure by business and geographical segment
|
Year ended 31 December 2008 |
Consulting and IP exploitation £000 |
Venture subsidiaries £000 |
Asset management £000 |
Property and central services £000 |
Total £000 |
|
United Kingdom |
275 |
283 |
- |
- |
558 |
|
Other European countries |
138 |
- |
- |
- |
138 |
|
North America |
58 |
- |
- |
- |
58 |
|
Other |
10 |
- |
- |
- |
10 |
|
481 |
283 |
- |
- |
764 |
|
Year ended 31 December 2007 |
Consulting and IP exploitation £000 |
Venture subsidiaries £000 |
Asset management £000 |
Property and central services £000 |
Total £000 |
|
United Kingdom |
70 |
- |
- |
5 |
75 |
|
Other European countries |
92 |
- |
- |
- |
92 |
|
North America |
17 |
- |
- |
- |
17 |
|
Other |
16 |
- |
- |
- |
16 |
|
195 |
- |
- |
5 |
200 |
Secondary reporting format - geographical segments
Sagentia's four business segments operate in four main geographical areas, even though they are managed on a worldwide basis.
Revenue by geographical area is as follows:
|
United Kingdom £000 |
Other European countries £000 |
North America £000 |
Other £000 |
Total £000 |
|
|
Year ended 31 December 2008 |
19,179 |
5,078 |
3,892 |
922 |
29,071 |
|
Year ended 31 December 2007 |
11,839 |
5,555 |
4,736 |
832 |
22,962 |
For the purpose of the analysis of revenue, geographical markets are defined as the country or area in which the client is based. Revenue and operating results arise from Sagentia's principal activities and are primarily generated by employees of Sagentia's United Kingdom subsidiary undertakings.
Assets by geographical area is as follows
|
United Kingdom £000 |
Other European countries £000 |
North America £000 |
Other £000 |
Total £000 |
|
|
Year ended 31 December 2008 |
27,990 |
6,029 |
909 |
194 |
35,122 |
|
Year ended 31 December 2007 |
25,187 |
7,374 |
585 |
311 |
33,457 |
For the purpose of the analysis of assets, geographical markets are defined as the country or area in which the asset is based.
5 Operating expenses
|
Expenses by nature Year ended 31 December |
Note |
2008 £000 |
2007 £000 |
|
|
Employee benefit expense (excluding share options) |
7 |
14,085 |
13,303 |
|
|
Rechargeable project expenses |
4,005 |
2,737 |
||
|
Operating third party expenses |
3,468 |
1,473 |
||
|
Occupancy costs |
1,492 |
1,684 |
||
|
Equipment and consumables |
880 |
918 |
||
|
Selling and marketing expenses |
1,785 |
1,654 |
||
|
Depreciation of property, plant and equipment |
13 |
371 |
405 |
|
|
Patent fees |
141 |
293 |
||
|
Recruitment and training |
670 |
345 |
||
|
Amortisation of intangible assets |
12 |
4 |
4 |
|
|
Foreign currency losses (gains) |
- |
16 |
||
|
Other |
834 |
878 |
||
|
27,731 |
23,710 |
|
Included above |
2008 £000 |
2007 £000 |
||
|
Research and development |
6,227 |
6,085 |
||
|
Operating lease rentals |
||||
|
Plant and machinery |
62 |
52 |
||
|
Other |
55 |
138 |
||
|
Auditors' remuneration |
||||
|
Services to the Company and its subsidiaries |
||||
|
Fees payable to the Company's auditors for the audit of the financial statements |
13 |
23 |
||
|
Fees payable to the Company's auditors and its associates for other services: |
||||
|
Audit of the financial statements of the Company's subsidiaries pursuant to legislation |
73 |
63 |
||
|
Other services supplied pursuant to legislation |
- |
7 |
||
|
Other services relating to corporate finance transaction |
60 |
- |
||
6. Finance income and finance costs
Finance costs include all interest-related income and expenses, other than those arising from financial assets at fair value through the profit or loss. The following have been included in the income statement for the reporting periods presented:
|
Year ended 31 December |
2008 £000 |
2007 £000 |
||
|
Finance income |
||||
|
Bank interest receivable and similar income |
16 |
86 |
||
|
Finance costs |
||||
|
Bank loans and overdrafts |
(536) |
(552) |
Other financial result
|
Year ended 31 December |
2008 £000 |
2007 £000 |
||
|
Change in fair value of interest rate swap |
(289) |
(19) |
||
7 Employee benefit expense
Employment costs are shown below:
|
Year ended 31 December |
2008 £000 |
2007 £000 |
||
|
Wages and salaries (including bonuses and healthcare costs) |
11,401 |
10,807 |
||
|
Social security costs |
1,717 |
1,538 |
||
|
Share options granted to directors and employees |
170 |
83 |
||
|
Other pension costs |
966 |
958 |
||
|
14,254 |
13,386 |
The average monthly number of persons employed (including executive directors) by Sagentia was as follows:
|
Year ended 31 December |
2008 Number |
2007 Number |
||
|
Technology consultants |
171 |
153 |
||
|
Marketing, support, administration and other |
||||
|
technically-qualified staff |
53 |
60 |
||
|
224 |
213 |
8 Directors' remuneration, interests and transactions
Aggregate remuneration
|
Year ended 31 December |
2008 £000 |
2007 £000 |
||
|
Emoluments |
408 |
154 |
||
|
Bonuses |
120 |
- |
||
|
Money purchase pension scheme contributions |
34 |
2 |
||
|
562 |
156 |
|||
Directors' emoluments and benefits include
|
Year ended 31 December 2008 Name of Director |
Salary/fee £000 |
Bonuses £000 |
Taxable Benefits £000 |
Pension contribution £000 |
Total £000 |
|
|
Masters |
50 |
- |
- |
- |
50 |
|
|
Brown |
112 |
73 |
1 |
18 |
204 |
|
|
Flicos |
129 |
27 |
2 |
3 |
161 |
|
|
McCarthy |
88 |
20 |
1 |
13 |
122 |
|
|
Ahlberg |
10 |
- |
- |
- |
10 |
|
|
Kylberg |
15 |
- |
- |
- |
15 |
|
|
Aggregate emoluments |
404 |
120 |
4 |
34 |
562 |
|
|
Year ended 31 December 2007 Name of Director |
Salary/fee £000 |
Bonuses £000 |
Taxable Benefits £000 |
Pension contribution £000 |
Total £000 |
|
|
Masters |
50 |
- |
- |
- |
50 |
|
|
Brown |
- |
- |
- |
- |
- |
|
|
Flicos |
88 |
- |
1 |
2 |
91 |
|
|
McCarthy |
- |
- |
- |
- |
- |
|
|
Ahlberg |
- |
- |
- |
- |
- |
|
|
Kylberg |
15 |
- |
- |
- |
15 |
|
|
Aggregate emoluments |
153 |
- |
1 |
2 |
156 |
Directors' emoluments and benefits are stated for the directors to Sagentia Group plc only. They include all emoluments and benefits earned from the date of appointment to the board of Sagentia Group plc together with any emoluments and benefits earned for those directors of Sagentia Group AG prior to the appointment as directors of Sagentia Group plc.
The above figures for emoluments do not include any gains made on the exercise of share options received under long-term incentive schemes.
Of the share based payment charge shown in the consolidated income statement for 2008, £8,000 relates to Brown and £1,000 to both Flicos and McCarthy (2007 - £Nil).
9 Tax income
The tax credit comprises:
|
Year ended 31 December |
2008 £000 |
2007 £000 |
||
|
Foreign taxation |
15 |
(16) |
||
|
Current taxation |
108 |
96 |
||
|
Deferred taxation (Note 10) |
- |
- |
||
|
123 |
80 |
The tax on Sagentia's losses before tax differs from the theoretical amount that would arise using the weighted average statutory tax rate applicable to profits of the consolidated companies as follows:
|
2008 £000 |
2007 £000 |
||
|
Loss before tax |
(2,210) |
(3,314) |
|
|
Tax calculated at domestic tax rates applicable to profits |
|||
|
(losses) in the respective countries |
(630) |
(994) |
|
|
Expenses not deductible for tax purposes |
624 |
545 |
|
|
Income not subject to tax |
(20) |
(101) |
|
|
Accelerated capital allowances |
(139) |
(205) |
|
|
R&D tax relief |
(228) |
(203) |
|
|
R&D tax credit received in respect of prior years |
(104) |
(96) |
|
|
Other temporary differences |
(5) |
33 |
|
|
Tax losses for which no deferred income tax asset was recognised |
379 |
941 |
|
|
Tax credit |
(123) |
(80) |
The weighted average statutory applicable tax rate was 28.5% (2007: 30%).
The Group has available tax losses of approximately £68.8m (2007: £78.8m).
10 Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority and the intention is to settle net. The offset amounts are as follows:
|
2008 £000 |
2007 £000 |
||
|
Deferred tax assets: |
|||
|
Deferred tax asset to be recovered after more than 12 months |
2,633 |
2,657 |
|
|
2,633 |
2,657 |
||
|
Deferred tax liabilities: |
|||
|
Deferred tax liabilities to be settled after more than 12 months |
(2,633) |
(2,657) |
|
|
(2,633) |
(2,657) |
||
|
Total |
- |
- |
The gross movement on the deferred income tax account is as follows:
|
2008 £000 |
2007 £000 |
||
|
Beginning of the year |
- |
- |
|
|
Exchange differences |
- |
- |
|
|
Income statement charge (Note 9) |
- |
- |
|
|
End of year |
- |
- |
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
|
Deferred tax liability** |
Deferred tax asset* |
Total |
||
|
At 1 January 2007 |
(3,014) |
3,014 |
- |
|
|
Charged / (credited) to the income statement |
357 |
(357) |
- |
|
|
Exchange differences |
- |
- |
- |
|
|
At 31 December 2007 |
(2,657) |
2,657 |
- |
|
|
Charged / (credited) to the income statement |
24 |
(24) |
- |
|
|
Exchange differences |
- |
- |
- |
|
|
At 31 December 2008 |
(2,633) |
2,633 |
- |
\* Tax losses
**Accelerated tax depreciation
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. Sagentia did not recognise deferred income tax assets of £16,982,000 (2007: £20,994,000) in respect of losses amounting to £59,586,000 (2007: £70,273,000) and other temporary differences amounting to £68,000 (2007: £88,000) that can be carried forward against future taxable income.
The Company did not recognise deferred income tax assets of £6,000 in respect of losses amounting to £13,000 that can be carried forward against future taxable income.
11 Loss per share
The calculations of loss per share are based on the following losses and numbers of shares:
|
Basic |
||||
|
2008 £000 |
2007 £000 |
|||
|
Loss for the financial year |
(2,087) |
(3,234) |
||
|
Weighted average number of shares: |
2008 Number |
2007 Number |
||
|
For basic earnings per share |
21,474,900 |
21,474,900 |
||
|
For fully diluted earnings per share |
21,582,916 |
21,474,900 |
Only the share options granted, as disclosed in note 17, are dilutive. Options have no dilutive effect in loss-making years, and hence the diluted loss per share for 2008 is the same as the basic loss per share.
12 Intangible assets
|
Group |
|
Software £000 |
||
|
At 1 January 2007 |
||||
|
Cost |
14 |
|||
|
Accumulated amortisation |
(5) |
|||
|
Net book amount |
9 |
|||
|
Year ended 31 December 2007 |
||||
|
Opening net book amount |
9 |
|||
|
Amortisation charge |
(4) |
|||
|
Closing net book amount |
5 |
|||
|
At 31 December 2007 |
||||
|
Cost |
14 |
|||
|
Accumulated amortisation |
(9) |
|||
|
Net book amount |
5 |
|||
|
Year ended 31 December 2008 |
||||
|
Opening net book amount |
5 |
|||
|
Amortisation charge |
(4) |
|||
|
Closing net book amount |
1 |
|||
|
At 31 December 2008 |
||||
|
Cost |
14 |
|||
|
Accumulated amortisation |
(13) |
|||
|
Net book amount |
1 |
Computer software is amortised on a straight line basis over its estimated useful life of 3 years. The annual amortisation charge is recognised in operating expenses of core operations in the income statement.
Sagentia Group plc had no intangible assets at the start or end of the year.
13 Property plant and equipment
|
Group |
Freehold land and buildings £000 |
Furniture and fittings £000 |
Equipment £000 |
Total £000 |
|
At 1 January 2007 |
||||
|
Cost |
16,682 |
1,189 |
3,200 |
21,071 |
|
Accumulated depreciation |
(2,474) |
(920) |
(2,890) |
(6,284) |
|
Net book amount |
14,208 |
269 |
310 |
14,787 |
|
Year ended 31 December 2007 |
||||
|
Opening net book amount |
14,208 |
269 |
310 |
14,787 |
|
Exchange differences on cost |
- |
(1) |
(13) |
(14) |
|
Exchange differences on depreciation |
- |
1 |
9 |
10 |
|
Additions |
- |
48 |
152 |
200 |
|
Disposals |
- |
- |
(32) |
(32) |
|
Depreciation charge |
(85) |
(104) |
(216) |
(405) |
|
Depreciation on disposals |
- |
- |
28 |
28 |
|
Closing net book amount |
14,123 |
213 |
238 |
14,574 |
|
At 31 December 2007 |
||||
|
Cost |
16,682 |
1,236 |
3,307 |
21,225 |
|
Accumulated depreciation |
(2,559) |
(1,023) |
(3,069) |
(6,651) |
|
Net book amount |
14,123 |
213 |
238 |
14,574 |
|
Year ended 31 December 2008 |
||||
|
Opening net book amount |
14,123 |
213 |
238 |
14,574 |
|
Exchange differences on cost |
- |
15 |
233 |
248 |
|
Exchange differences on depreciation |
- |
(14) |
(193) |
(207) |
|
Additions |
- |
179 |
585 |
764 |
|
Disposals |
- |
- |
(712) |
(712) |
|
Depreciation charge |
(86) |
(92) |
(193) |
(371) |
|
Depreciation on disposals |
- |
- |
712 |
712 |
|
Closing net book amount |
14,037 |
301 |
670 |
15,008 |
|
At 31 December 2008 |
||||
|
Cost |
16,682 |
1,430 |
3,413 |
21,525 |
|
Accumulated depreciation |
(2,645) |
(1,129) |
(2,743) |
(6,517) |
|
Net book amount |
14,037 |
301 |
670 |
15,008 |
The property is held at cost less depreciation. Included within land and buildings for Sagentia is freehold land, to the value of £1,360,000 (2007: £1,360,000) which has not been depreciated. Cumulative interest capitalised up to 31 December 2003 was £340,000. No further interest has been capitalised since. The property was last valued during August 2008 by Savills for Lloyds TSB. Under the assumptions used, including tenant covenant strength and market rents, the indicative valuation for the building under a sale and leaseback scenario is £13.75m The directors therefore do not believe that the carrying value of the property is significantly different to its fair value.
The property generated rental income of £2,249,000 in 2008 (2007: £1,713,000) of which £989,000 (2007: £868,000) was charged to related group companies. The interest in freehold land and buildings has been charged as security to the bank loan (see Note 20).
Sagentia Group plc had no fixed assets at the start or end of the year.
14 Investments
|
Company |
Group |
|||||||
|
Designated at fair value through profit or loss |
Equity investments £000 |
Loans and receivables £000 |
Total £000 |
Equity investments £000 |
Loans and receivables £000 |
Total £000 |
||
|
Fair value, January 2007 |
- |
- |
- |
9,443 |
1,836 |
11,279 |
||
|
Additions |
- |
- |
- |
315 |
- |
315 |
||
|
Disposals |
- |
- |
- |
(130) |
(193) |
(323) |
||
|
Change in fair value |
- |
- |
- |
(3,736) |
35 |
(3,701) |
||
|
Foreign exchange |
- |
- |
- |
- |
- |
- |
||
|
Fair value, December 2007 |
- |
- |
- |
5,892 |
1,678 |
7,570 |
||
|
Fair value, January 2008 |
- |
- |
- |
5,892 |
1,678 |
7,570 |
||
|
Additions |
10,510 |
- |
10,510 |
- |
- |
- |
||
|
Disposals |
- |
- |
- |
(216) |
(84) |
(300) |
||
|
Change in fair value |
- |
- |
- |
(1,590) |
(392) |
(1,982) |
||
|
Impairment of financial assets |
- |
- |
- |
- |
- |
- |
||
|
Foreign exchange |
- |
- |
- |
5 |
(2) |
3 |
||
|
Fair value, December 2008 |
10,510 |
- |
10,510 |
4,091 |
1,200 |
5,291 |
||
All disposals during the year were for a cash consideration.
Financial assets held at fair value include the following:
|
Company |
Group |
|||
|
Group |
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
Quoted securities |
||||
|
Cost - equity securities - UK |
- |
- |
1,268 |
1,425 |
|
- equity securities - US |
- |
- |
- |
- |
|
- |
- |
1,268 |
1,425 |
|
|
Fair value adjustment |
- |
- |
380 |
701 |
|
- |
- |
1,648 |
2,126 |
|
|
Unquoted securities |
||||
|
Cost |
10,510 |
- |
6,273 |
10,202 |
|
Fair value adjustment |
- |
- |
(3,830) |
(6,436) |
|
10,510 |
- |
2,443 |
3,766 |
|
|
- |
||||
|
Financial assets held at fair value |
10,510 |
- |
4,091 |
5,892 |
Quoted securities are listed investments with fair value based on bid prices at the balance sheet date.
Unquoted securities are unlisted investments with fair value based on a valuation methodology used most commonly by Sagentia, being as set out by the BVCA as described in note 2, reflecting the early stage nature of the investments.
Disposal of subsidiary undertakings in 2008
|
Group |
Chord Capital Ltd £000 |
||||
|
Non-current assets |
|||||
|
- Intellectual Property |
- |
||||
|
- Property, plant and equipment |
- |
||||
|
Current assets |
49 |
||||
|
Borrowings |
- |
||||
|
Current liabilities |
(39) |
||||
|
Total equity |
10 |
||||
|
Minority interests |
- |
||||
|
Cash invested |
- |
||||
|
Realised profit on sale |
- |
||||
|
Unrealised gain on issue of shares |
- |
||||
|
Cost of investment |
- |
||||
|
Sale proceeds |
10 |
Chord Capital Ltd, and its subsidiary Cascade Generics Ltd, was sold in July 2008 for an total cash consideration of £10,000, before costs of disposal of £Nil. Chord Capital Ltd incurred a loss after taxation and minority interests of £2,000 before the disposal.
During 2008, Chord Capital Ltd utilised £11,000 of Sagentia's net operating cash flows, paid £Nil in respect of net returns on financial assets and servicing of finance, and utilised £Nil for capital expenditure and financial investment.
The sale of Intrasonics Ltd to Mainframe Participarties BV was the only disposal of operating subsidiaries during 2007.
Principal Group investments
Sagentia held investments in the following subsidiaries and investments at 31 December 2008. To avoid a statement of excessive length, details of investments that are not significant have been omitted.
|
Subsidiary and investments of Sagentia Group plc |
Country of incorporation |
Principal activity |
Shares held |
% |
|
Core Operations |
||||
|
Sagentia Group AG |
Switzerland |
Holding company |
Ordinary |
99.6 |
|
Sagentia Holdings Limited |
England |
Holding company |
Ordinary |
100 |
|
Sagentia Limited |
England |
Consultancy |
Ordinary |
100 |
|
Manage5nines Limited |
England |
IT Consultancy |
Ordinary |
80 |
|
Sagentia Inc. |
USA |
Consultancy |
Ordinary |
100 |
|
Sagentia S-GAI Limited |
Hong Kong |
Consultancy |
Ordinary |
63 |
|
Sagentia GmbH |
Germany |
Consultancy |
Ordinary |
100 |
|
Sagentia Catella AB |
Sweden |
Battery technology |
Ordinary |
100 |
|
Venture Subsidiaries |
||||
|
Atranova™ Limited |
England |
Battery technology |
Ordinary |
81 |
|
Sensopad Limited |
England |
Sensor technology |
Ordinary |
77 |
|
Sagentia Sensors Ltd |
England |
Sensor technology |
Ordinary |
77 |
|
Investments |
||||
|
Sphere Medical Holding Limited |
England |
Medical sensor technology |
Ords & A's |
11 |
|
CMR Fuel Cells plc* |
England |
Fuel cell technology |
Ordinary |
11 |
|
Atraverda™ Limited |
England |
Battery technology |
Ords & A's |
18 |
|
Sensortec Limited |
Jersey |
Environmental sensing technology |
Ordinary |
12 |
* Quoted on the UK Alternative Investment Market (AIM).
All subsidiaries for which accounts are provided have year-ends of 31 December.
15 Trade and other receivables
|
Company |
Group |
|||
|
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Current assets: |
||||
|
Trade receivables |
- |
- |
5,651 |
6,280 |
|
Provision for impairment |
- |
- |
(226) |
(97) |
|
Trade receivables - net |
- |
- |
5,425 |
6,183 |
|
Amounts recoverable on contracts |
- |
- |
737 |
1,350 |
|
VAT |
6 |
- |
73 |
23 |
|
Prepayments and accrued income |
- |
- |
533 |
177 |
|
6 |
- |
6,768 |
7,733 |
|
|
Current tax asset |
- |
- |
80 |
59 |
|
6 |
- |
6,848 |
7,792 |
|
All amounts disclosed above are short-term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
All of Sagentia's trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be impaired and a provision of £226,000 has been provided in the year (2007: £97,000).
In addition, some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but not impaired is as follows:
|
Company |
Group |
|||
|
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Not more than 3 months |
- |
- |
5,128 |
6,025 |
|
More than 3 months but not more than 6 months |
- |
- |
255 |
123 |
|
More than 6 months but not more than 1 year |
- |
- |
42 |
22 |
|
More than 1 year |
- |
- |
- |
13 |
|
- |
- |
5,425 |
6,183 |
|
16 Cash and cash equivalents
|
Company |
Group |
|||
|
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Short term bank deposits |
- |
- |
- |
- |
|
Cash at bank and in hand |
- |
- |
5,341 |
859 |
|
- |
- |
5,341 |
859 |
|
Of the cash at bank and in hand detailed above, the following amounts are held, principally in our venture subsidiary companies and are for use within those companies.
|
Group |
||||
|
2008 £000 |
2007 £000 |
|||
|
Cash held within spin-out companies |
567 |
1 |
||
Effective interest rates achieved are shown in Note 3.
17 Called-up share capital
|
2008 £000 |
2007* £000 |
|||
|
Authorised |
||||
|
Ordinary shares of £0.01 each |
464 |
464 |
||
|
Convertible preference shares of £1.00 each |
50 |
- |
||
|
Allotted, called-up and fully paid |
||||
|
Ordinary shares of £0.01 each |
215 |
215 |
||
|
Convertible preference shares of £1.00 each |
50 |
- |
||
|
Number |
Number |
|||
|
Authorised |
||||
|
Ordinary shares of £0.01 each |
46,386,390 |
46,386,390 |
||
|
Convertible preference shares of £1.00 each |
50,000 |
- |
||
|
Allotted, called-up and fully paid |
||||
|
Ordinary shares of £0.01 each |
21,474,900 |
21,474,900 |
||
|
Convertible preference shares of £1.00 each |
50,000 |
- |
\* The 2007 comparatives show the consolidated position as though the ordinary shares were in issue and had been exchanged for Sagentia Group AG shares in line with the accounting treatment explained in Note 2.
Sagentia Group plc was incorporated in England and Wales on 17 March 2008. Authorised share capital on incorporation comprised 46,386,390 ordinary shares of £0.01 each and 50,000 convertible preference shares of £1 each. Of the ordinary shares, 2 were issued at par on incorporation. The remainder have been issued over 6 tranches between 8 July 2008 to 14 November 2008 as part of the Sagentia Group plc offer for Sagentia Group AG, where 1 Sagentia Group plc share was exchanged for 10 Sagentia Group AG shares.
The convertible preference shares were issued at par on 30 May 2008. Each convertible preference share may be converted into 2.96 ordinary shares (the total ordinary shares created to be rounded down to the nearest whole number)
Sagentia Group plc holds an interest in its own shares. At 31 December 2008, Sagentia Group AG held 61,080 (2007: 61,080) ordinary shares of £0.01 each in Sagentia Group plc, and Sagentia Group Employee Share Trust held 50,000 (2007: Nil) convertible preference shares and 4,210 (2007: 4,210) ordinary shares in Sagentia Group plc. These shares are to be utilised against share options already granted.
On 9 January 2009 a further 19,671 shares were issued in exchange for 196,721 Sagentia Group AG shares.
The value of Sagentia Group plc shares, as quoted on the London Stock Exchange plc at 31 December 2008, was 17.0 pence per share (2007: 40p).
|
Reconciliation of options in grant |
2008 |
|||
|
No. |
Weighted average exercise price (p) |
|||
|
At beginning of year |
- |
- |
||
|
Granted during year |
1,587,654 |
17.5 |
||
|
Issued in exchange for Sagentia Group AG options |
971,831 |
45.0 |
||
|
At end of year |
2,559,485 |
27.9 |
||
No options were exercised in 2008 or 2007.
Exercise of an option is subject to continued employment, and normally lapse upon leaving employment, although this period may be extended where an employee is deemed a 'good leaver'. Options were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations; expected dividends were assumed to be nil; possibility of ceasing employment before vesting was assumed to be nil. The risk free rate was taken as 3.0%. Volatility is taken from data provided by Bloomberg L.P. over an appropriate time period, usually being a 100 day rolling average. Other assumptions which varied with the option issue are given in the table below. The total charge for the year under the Black-Scholes model relating to employee share based payment plans was £170,000 (2007: £83,000), all of which related to equity-settled share based payment transactions. After deferred tax the total charge was £170,000 (2007: £83,000). The fair value per option granted and the assumptions used in the calculation are as follows:
At 31 December 2008, options granted to subscribe for ordinary shares of the company are as follow:
|
Date of grant |
Option exercise period |
Number of shares under option |
|||||||||||||
|
From (1) |
To(2) |
Approved scheme |
Unapproved scheme |
Exercise price (pence (3)* |
Fair Value of options(4) |
Expected Life (years) |
Volatility |
||||||||
|
Dec 2007 (5) |
Dec 2007 |
Dec2009 |
- |
826,986 |
45.0 |
28.8p |
10 |
58% |
|||||||
|
Mar 2008 (5) |
Mar 2008 |
Mar 2010 |
- |
144,845 |
45.0 |
28.8p |
10 |
58% |
|||||||
|
Nov 2008 |
Nov 2008 |
Nov 2011 |
1,483,741 |
103,913 |
17.5 |
9.93p |
10 |
42% |
|||||||
|
1,483,741 |
1,075,744 |
||||||||||||||
(1) Subject to earlier exercise in certain limited circumstances. Where range of dates provided, shares under option have been granted with exercise periods which commence on different dates.
(2) Where range of dates provided, shares under options have been granted with exercise periods which expire on different dates.
(3) The exercise price is also the share price at grant date.
(4) The fair value of options has not been calculated for options granted but not expired before November 2002 in accordance with IFRS2.
(5) Originally issued as options over Sagentia Group AG shares.
18 Other non current liabilities
|
Company |
Group |
||||
|
Note |
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Loans from minorities to subsidiaries |
20 |
- |
- |
430 |
430 |
|
Bank loans |
20 |
- |
- |
9,000 |
6,813 |
|
- |
- |
9,430 |
7,243 |
||
|
Other creditors |
- |
- |
90 |
69 |
|
|
Fair value of interest rate swap |
- |
- |
489 |
200 |
|
|
Deferred income tax liabilities |
- |
- |
2,633 |
2,657 |
|
|
- |
- |
12,642 |
10,169 |
||
Loans from minorities to subsidiaries and bank loans:
See explanation per note 20.
Fair value of interest rate swap:
The interest rate swap was used to separately fix the interest rate on the original floating rate mortgage over the property at Harston Mill at 6.1%. The swap matched the original repayment schedule envisaged over 10 years from £8.0m to £2.5m. The loan balance was expected to be, and hence the amount covered by the Swap agreement is, £4.4m at the end of 2008 (2007: £5.0m).
19 Current liabilities
|
Company |
Group |
||||
|
Note |
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Trade and other payables - current |
|||||
|
Payments received on account |
- |
- |
2,439 |
1,345 |
|
|
Trade payable |
23 |
- |
1,258 |
821 |
|
|
Loans from minorities to subsidiaries |
- |
- |
502 |
- |
|
|
Other taxation and social security |
42 |
- |
528 |
613 |
|
|
Amounts owed to group undertakings |
23 |
496 |
- |
- |
- |
|
VAT |
- |
- |
122 |
448 |
|
|
Accruals |
25 |
- |
2,077 |
1,664 |
|
|
586 |
- |
6,926 |
4,891 |
||
|
Bank loans and overdrafts |
20 |
1 |
- |
113 |
823 |
|
Current tax liabilities |
- |
- |
- |
36 |
|
|
587 |
- |
7,039 |
5,750 |
||
20 Borrowings
|
2008 |
2007 |
||||||
|
Group |
Note |
UK £000 |
Foreign £000 |
Total £000 |
UK £000 |
Foreign £000 |
Total £000 |
|
Non-current |
|||||||
|
Bank borrowings |
18 |
9,000 |
- |
9,000 |
6,813 |
- |
6,813 |
|
Loans from minorities to subsidiaries |
18 |
430 |
- |
430 |
430 |
- |
430 |
|
9,430 |
- |
9,430 |
7,243 |
- |
7,243 |
||
|
Current |
|||||||
|
Bank borrowings |
19 |
- |
113 |
113 |
765 |
58 |
823 |
|
Total borrowings |
9,430 |
113 |
9,543 |
8,008 |
58 |
8,066 |
|
|
2008 |
2007 |
||||||
|
Company |
Note |
UK £000 |
Foreign £000 |
Total £000 |
UK £000 |
Foreign £000 |
Total £000 |
|
Non-current |
|||||||
|
Bank borrowings |
18 |
- |
- |
- |
- |
- |
- |
|
Loans from minorities to subsidiaries |
18 |
- |
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
- |
||
|
Current |
|||||||
|
Bank borrowings |
19 |
1 |
- |
1 |
- |
- |
- |
|
Total borrowings |
1 |
- |
1 |
- |
- |
- |
|
As at 31 December 2008, Group companies have granted charges over their assets to secure a five year bank loan from March 2006 for £9.0m (2007: £9.0m) for Sagentia Holding Ltd. The loan is subject to certain banking covenants including that the amount drawn shall not exceed 85% of the value of the charged security, ie that the building has to remain valued in excess of £10.6M; and that the loan doesn't exceed 70% of consolidated net worth (of Sagentia Group AG consolidated accounts) - (ie shareholders equity for Sagentia Group AG does not fall below £12.9M).
The annual revolving facility of £2.0m (2007 £2.0m) for Sagentia Ltd, was not renewed in 2008. Of the current bank loans and overdrafts, at 31 December 2008, £9,000,000 (2007: £6,813,000) has been drawn down and is repayable by Sagentia Group Ltd to Lloyds TSB Bank Plc, and £113,000 (2007: £58,000) is repayable on call by Sagentia Catella AB.
Loans from minorities to venture subsidiaries are usually non interest bearing and repayable on call. They are shown in current borrowings, although they are unlikely to be able to be recalled within 12 months.
In accordance with an agreed repayment schedule with the bank, bank loans and overdrafts are repayable to Lloyds TSB Bank plc as follows:
|
Company |
Group |
|||
|
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
|
Between 1 and 2 years |
- |
- |
- |
- |
|
Between 2 and 5 years |
- |
- |
9,000 |
6,813 |
|
Over 5 years |
- |
- |
- |
- |
|
- |
- |
9,000 |
6,813 |
|
An interest rate swap has fixed approximately half of the loan at an interest rate at 6.13% plus bank charges of 1%, which is payable quarterly. The remainder is at Lloyds TSB Bank plc base rate + 0.8%.
21 Commitments
Lease commitments
The minimum annual rentals under non-cancellable operating leases are as follows:
|
Company |
Group |
|||
|
Plant and equipment lease commitments |
2008 £000 |
2007 £000 |
2008 £000 |
2007 £000 |
|
Operating lease payments: |
||||
|
-Within one year |
- |
- |
46 |
20 |
|
-Between one and five years |
- |
- |
41 |
17 |
|
Property lease rentals |
||||
|
Operating lease payments: |
||||
|
- Within one year |
- |
- |
376 |
247 |
|
-Between one and five years |
- |
- |
369 |
117 |
22 Capital and other financial commitments
At 31 December 2008 the Group and the Company had commitments of £Nil (2007: £Nil). The Group had a committed un-drawn overdraft facility of £Nil at 31 December 2008 (2007: £2.2m)
At 31 December 2008, the Group had a 5 year loan facility of £9.0m secured on Harston Mill, Cambridge, UK, of which £9.0m (2007: £6.8m) had been drawn down. This facility is repayable in March 2011 as detailed in Note 20. The Company has no loan facility at 31 December 2008 (2007: £Nil).
23 Related party transactions
The Group provides support, IT and consultancy services to its subsidiaries and made loans as follows:
|
Group |
2008 Loans |
2008 Sale of goods and services |
2007 Loans |
2007 Sale of goods and services |
|
£000 |
£000 |
£000 |
£000 |
|
|
Flying Null Ltd |
833 |
- |
833 |
- |
|
Sensopad Ltd |
1,068 |
52 |
979 |
129 |
|
FD Technologies |
160 |
- |
160 |
- |
|
Atranova Ltd |
1,032 |
111 |
494 |
47 |
|
Manage5Nines Ltd |
- |
648 |
6 |
390 |
|
Sagentia Public Sector Ltd |
- |
19 |
- |
- |
|
Sagentia Sensors Ltd |
715 |
300 |
341 |
116 |
|
3,808 |
1,130 |
2,813 |
682 |
|
Company |
2008 Loans |
2008 Sale of goods and services |
2007 Loans |
2007 Sale of goods and services |
|
£000 |
£000 |
£000 |
£000 |
|
|
Sagentia Ltd |
496 |
300 |
- |
- |
|
496 |
300 |
- |
- |
Disclosure is shown above only for subsidiary undertakings in Sagentia when Sagentia owns less than 90% and provide funding and / or other services.
Key personnel are the executive directors and non executive directors of Sagentia. Remuneration to key personnel is disclosed in note 8.
24 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
24.1 Critical accounting estimates and assumptions
Sagentia makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Fair value of investments
Sagentia tests regularly whether investments, deferred income or other loans have suffered any impairment, in accordance with the accounting policy stated in Note 2. The recoverable amounts have been determined based on BVCA calculations. These calculations require the use of estimates and assumptions on both the recoverability of the loans or deferred income and ability to dispose of the asset for value on an individual investment basis.
(b) Project accounting
Sagentia undertakes a number of fixed price consultancy projects. The state of completeness of each project, and hence, revenue recognised, requires the use of estimates. The value of work done is calculated based on proportion of time spent on the project or value of stage gates achieved as set out in the project.
(c) Other loans recognition
Sagentia has recognised deferred income amounting to £1,200,000 (2007 £1,677,000) within Investments - loans and receivables that will become due and receivable as part of the consideration of the disposal of Sensopad Ltd to TT Electronics plc. The repayment of the loan is dependent upon TT Electronics plc achieving various target revenues which will generate a royalty payable to Sagentia
(d) Acquisition of Sagentia Group AG by Sagentia Group plc
These statements consolidate the financial statements of Sagentia Group plc and its subsidiary undertakings drawn up to 31 December each year. For the purpose of preparing the consolidated accounts the Group reorganisation is not considered to be a business combination under IFRS. Thus, the directors have treated the results and cash flows of the combined entities brought into the consolidated financial statements of Sagentia Group plc, restating comparative results, as though they had always been combined. The comparative balance sheet at 31 December 2007 is as the position of Sagentia Group AG, except that the share capital, share premium and reserve accounts have been restated to create a merger reserve, to reflect the position assuming the share for share exchange had occurred at this date.
25 Post balance sheet events
CMR Fuel Cells plc announced in a circular to shareholders on 14 January 2009 a Tender Offer Price of 20 pence per Ordinary Share. Sagentia have tendered all their shares, which was accepted on 12 February 2009.
Completion of the Tender Offer is subject to the confirmation by the Court of the proposed Capital Reduction. Subject to the confirmation, it is anticipated that Sagentia will receive cleared funds of £447,000 by 19 March 2009.
Related Shares:
Science Group