Preliminary Results 2012

ABCAM PLC

("Abcam" or "the Company")

Preliminary Results for the Year Ended 30 June 2012

Abcam plc (AIM: ABC), a global leader in the supply of protein research tools, is pleased to announce its preliminary results for the year ended 30 June 2012.

Highlights

·; Revenue increased by 17.5% to £97.8m (2011: £83.3m)

·; At constant currencies and excluding the contribution from acquisitions made in the year, revenue growth was 11.5%

·; Adjusted operating profit* increased by 20.9% to £38.6m (2011: £31.9m)

·; Adjusted diluted EPS* increased by 19.2% to 15.59p (2011: 13.08p)

·; Closing cash and term deposits of £17.5m (2011: £55.6m), with no bank debt outstanding

·; Successful acquisitions of Ascent Scientific Ltd (Ascent), a specialist provider of biochemical reagents, and Epitomics International Inc (Epitomics), a high growth protein reagents business

·; Number of products on the catalogue grew by 25.5% to 92,456 (2011: 73,652)

·; Proposed 14.7% increase in final dividend to 4.36p (2011: 3.80p) giving a 15.2% increase for the year

·; Trading since the year end has been in line with the Board's expectations

* Excluding £1.0m of acquisition-related intangible amortisation and £3.4m of other acquisition-related charges and, in the case of EPS, the related tax effect.

Commenting on the preliminary results, Jonathan Milner, Abcam's Chief Executive Officer, said:

"The year to 30 June 2012 was a period of great progress at Abcam. Our business performed well and, through the acquisitions of Ascent and Epitomics, we took major steps towards achieving our goal of becoming the world's leading life science reagents company.

"From a trading perspective, we expect Western markets to remain uncertain as Governments address fiscal deficits but, looking ahead, in this golden age of biology and discovery, the demand for high quality, discovery research tools can only increase, creating an abundance of opportunities for Abcam to help our customers discover more."

For further information please contact:

Notes for editors

About Abcam plc

Abcam is a producer and distributor of high quality protein research tools. These tools enable life scientists to analyse components of living cells at the molecular level, which is essential in understanding health and disease.

Headquartered in Cambridge (UK), Abcam has subsidiary offices in Bristol (UK), Cambridge, MA (USA), Eugene, OR (USA), San Francisco, CA (USA), Tokyo (Japan), Hangzhou and Hong Kong (both in China), allowing it to serve a global customer base in over 130 countries. Abcam employs over 600 staff across its eight operating companies.

 At 30 June 2012 Abcam had an online catalogue of 92,456 products sourced from more than 400 suppliers. The catalogue includes a growing range of non-primary antibody products such as secondaries, proteins, peptides, lysates, immunoassays and other kits. Products are available for life science research and distributed to academic and commercial users. A highly developed eCommerce platform, which includes regional websites for the Chinese and Japanese markets, allows customers to access up-to-date and detailed technical product data sheets at the Company's website, www.abcam.com.

Abcam was admitted to AIM in November 2005 and trades under the ticker symbol ABC. The Company's vision is to be the world's leading life science reagents company.

Chairman's Statement

I am pleased to report that we have achieved a good result for the year, despite demanding market conditions that have put continued pressure on our customers' budgets. At the same time we have taken huge strides towards our goal of becoming the world's leading life science reagents company.

In a tough macro-economic environment, in which Western Governments are dealing with large fiscal deficits and the levels of expenditure on centrally funded research are under pressure, I am pleased to report that Abcam has had another successful year. Adjusted profit before tax was £39.0m, before one-off costs incurred during the year of £3.4m relating to the acquisitions of Ascent Scientific Limited (Ascent, now known as Abcam Bristol) and Epitomics International Inc (Epitomics) and amortisation of the associated intangible assets from those acquisitions, together with those arising on the acquisition of MitoSciences Inc (MitoSciences, now known as Abcam Eugene), together amounting to £1.0m.

We have made significant progress in our strategy to drive growth by extending our product ranges, both through the two acquisitions closed in the period as well as by broadening the number and range of products in the catalogue from OEM suppliers. Our recent acquisitions have also opened up new market opportunities in in vitro diagnostic immunohistochemistry (IVD IHC), immunoassays, custom service and bioactive small molecules.

We have also maintained our push into markets in the East, where there are many growth opportunities. The differentiated nature and breadth of our product range are important drivers in pursuit of this strategy, which has been enhanced through the acquisition of Epitomics, with its manufacturing base in China.

Dividends

We are committed to delivering increasing returns to our shareholders. In light of the strong cash flow and continued success of the Group, our policy is to distribute an annual dividend of 40% of adjusted post-tax profit, after adding back costs of acquisition and amortisation of acquisition-related intangibles. An interim dividend of 1.69p per share was paid in April 2012 and consequently the Directors are recommending a final dividend of 4.36p per share, making a total of 6.05p for the year, an increase of 15.2% on that paid last year. Subject to shareholder approval at the AGM in October 2012, the final dividend will be paid on 23 November 2012 to shareholders on the register on 2 November 2012.

Governance and the Board

With significant progress made in the year in the implementation of our strategy, the Board provided ongoing enquiry and support to our Executive Directors, ensuring that they deliver the business plan effectively and efficiently.

We look very carefully at our Board composition, considering the skills required to improve our effectiveness. During 2011 we recognised the need to strengthen our knowledge base and experience to more specifically align the Board in relation to the global life science reagents sector and eCommerce trading. We were therefore delighted to welcome three new Non-Executive Directors, Anthony Martin, Murray Hennessy and Michael Ross, who have abundant expertise in these fields. We will continue to ensure that we have the appropriate balance of skills as we move forward.

Following completion of over 14 years' service as a Non-Executive Director, Tony Kouzarides, an original founder of the Company, has decided to step down from the Board after next month's AGM. I would like to thank Tony on behalf of everyone at Abcam for the immense contribution he has made, playing a vital role in the Company's success to date.

Tim Dye and Mark Webster retired this year and I would also like to thank them both again for their considerable contributions to the Board.

Joint broker

We were pleased to announce the appointment of Peel Hunt LLP as joint broker in March 2012. Numis Securities Limited remains as the Company's nominated advisor, financial advisor and joint broker.

Looking ahead

We have a clear plan for the business and we are committed to its execution. We expect Western markets will remain challenging as Governments address fiscal deficits, and that this in turn will create funding uncertainties for researchers in the US and Europe. The US position is unlikely to be clearer until after the Presidential election later this year, whilst in Europe the likely timing and outcome of the issues faced by the single currency add further uncertainty to the situation. This only serves to illustrate how vital it is that we are listening to our customers, staying true to our values and consistently executing on our strategy; in doing so we will strengthen our business and our relationships with all our stakeholders.

I never fail to be impressed by the dedication of our employees at all levels and the pride they show in their work. I would like to thank them for all they do to make this business consistently successful.

Mike Redmond

Chairman

5 September 2012

Chief Executive Officer's Review

In 2011/12 Abcam has performed well, with sales increasing by 17.5% and adjusted profit before tax increasing by 20.7%. This demonstrates that, in a tough environment, our customers continue to recognise the outstanding quality of our product and service offerings.

To date, we have built a superb business, predicated on a sound underlying business model and our core values. We are passionate about everything we do, striving to be the best in the world and aiming to deliver the best possible products to our customers, resulting in maximising returns for our shareholders.

The key to our ongoing strategy lies in our aims to:

• Optimise our existing products for our customers by continuing to increase the validation information on the products in the catalogue from as many relevant sources as possible;

• Continue improving our levels of customer service and scientific support to help our customers get the results they need from their research;

• Expand our core range of high quality primary antibodies by developing new products in-house as well as maintaining and expanding our network of excellent OEM suppliers;

• Enhance the breadth of our product catalogue by identifying new product ranges which will serve our existing customer base;

• Identify opportunities to add new products which will enter adjacent segments of the market;

• Continue to attract new customers; and

• Extend our geographic penetration.

I am delighted to report that we have made significant progress on all these fronts during the year, and we continue to focus on further enhancements to this strategy and ways to improve its execution into 2012/13 and beyond.

Geographic market review

The following table outlines our revenues in each geographic region, along with constant currency growth rates:

* Calculated by comparing 2011/12 revenues to 2010/11 revenues at the exchange rates prevailing in 2010/11.

The Americas

A large proportion of US research funding is provided by the National Institutes of Health (NIH), the future budget for which has been caught up in broader discussions among politicians about the overall levels of government expenditure in light of the country's fiscal deficit. 

The relationship between US central funding and its impact on Abcam's sales is complex. We have grown for many years significantly ahead of NIH's core budget levels, and it is difficult to determine whether or to what extent Abcam has been a beneficiary of the $10.4bn provided to NIH funding under the American Recovery and Reinvestment Act of 2009. Furthermore, as a provider of research tool consumables, Abcam can expect to be less affected by reductions in the NIH budget than, for example, those companies supplying more expensive laboratory equipment.

Nevertheless, NIH-funded researchers have faced considerable uncertainty during the year since it was only late in the first half of our 2012 financial year that a budget was finally agreed, with a relatively positive 1% increase through to September 2012. Uncertainty remains a feature of the market however and is likely to remain so at least until after the presidential election later this year.

Elsewhere within The Americas we plan to improve our performance in Canada by increasing the level of customer service we are able to offer, whilst Latin America, most notably Brazil, has shown good growth.

Longer-term prospects in The Americas will be affected by the pace at which the US decides to reduce its deficit and what that means for the NIH budget.

Europe, Middle East & Africa (EMEA)

In our main EMEA markets, performance has been good in the UK and satisfactory in France and Germany, whose relatively strong economy has attracted more competition during the period.

Overall we are pleased with our performance in the smaller EMEA markets, particularly in Italy and Spain, whose economic difficulties continue to be widely reported. Elsewhere, in The Netherlands and Switzerland the local distributors we appointed to focus on particular parts of the market did not perform to our expectations. Our focus for the new financial year is on building closer relationships with our customers in those areas and improving our product positioning to make purchasing even easier.

In the longer term, the likely timing and outcome of the issues faced by the single currency add further uncertainty to the situation within the EMEA region and we aim to ride these out with an increased focus on customer segmentation and cross-selling to take advantage of our expanding product range, and continued efforts in growth markets such as India.

Japan

Growth in Japan was strong in the year, assisted by a stimulus package for research funding which began in October 2011 following a delay caused by the earthquake in March 2011. Abcam's superior offering has been the principal driver behind our growth historically, but we should be mindful that the longer term prospects in Japan may be linked to the amount of funding provided centrally to the recovery efforts following last year's earthquake. Nevertheless this is a fine performance and due credit goes to our dedicated staff in Japan.

Asia Pacific

The revenue increase in China was satisfactory, although impacted by external factors. The high level of growth achieved in the 2011 financial year made comparatives for this year more challenging, and there was a delay in the releasing of the funding to support the latest five year economic plan. Elsewhere growth was strong, notably in South Korea and Taiwan.

Given the strong funding in the region, particularly in China, Asia Pacific continues to be a market of significant potential for us.

Overall the 2011/12 financial year saw challenging market conditions in many of our main geographic markets and we expect the funding uncertainties faced by many of our customers to continue into the new financial year. Despite this, we believe Abcam is well positioned to successfully maintain its position in the market.

Acquisition of Ascent

A key focus for us this year has been in progressing our M&A strategy. During the year we acquired two companies and started the longer term projects of successfully integrating these businesses, along with that of Abcam Eugene, which was acquired shortly before the previous financial year end.

We completed the acquisition of Ascent on 12 September 2011. Ascent, now known as Abcam Bristol, has built an excellent reputation as a provider of high quality biochemical products used by life science researchers for modulating the function of proteins and has been quick to bring new, best-in-class reagents to market, backed by specialist technical support. This approach is very much in line with Abcam's ethos and many Abcam customers already use bioactive small molecules in their research. Consequently this range of reagents, which we have branded as Abcam Biochemicals, is a great complement to our existing catalogue of protein research tools.

In the period since acquisition, we have added over 200 new biochemicals to our catalogue through in-house manufacture as well as outsourcing, and at the year end the full Abcam Biochemicals range of diverse bioactive small molecules totalled 656 products.

We are excited by the opportunity the Abcam Bristol acquisition has brought us to bring this complementary product range to our existing customer base and we are investing in our IT infrastructure to improve the cross-selling of these products. Sales of Abcam Biochemicals contributed revenue of £1.4m since acquisition and we expect the planned catalogue expansion and increased market penetration to produce strong underlying revenue growth in 2012/13.

Acquisition of Epitomics

We completed the purchase of Epitomics on 19 April 2012. Epitomics is focused on the development, production and distribution of rabbit monoclonal antibodies (RabMAbs®) for biomedical research and diagnostic applications.

RabMAb® products are superior to existing polyclonal and monoclonal antibodies for many applications. This is because they offer researchers a combination of higher affinity (meaning that they bind stronger to the target protein) and increased specificity (producing fewer off-target interactions). As well as developing and distributing RabMAbs® for academic and pharmaceutical research applications, this enables Epitomics to offer a custom production service to meet customers' specific requirements, providing solutions for research and diagnostic applications.

The superior quality of these products also allows Epitomics to offer a line of high quality antibodies for anatomical pathology - the in vitro diagnostics immunohistochemistry (IVD IHC) arm of the business, which provides RabMAbs® primarily for clinical diagnosis and prognosis of certain cancers including colon, prostate, ovarian and lymphoma. We are excited about the future potential of this market, although the current base is very small and is still in the early stages of development.

Additionally, Epitomics generates income from certain royalty payments and licence deals that it has with life science tools companies that pay to utilise aspects of Epitomics's patented RabMAb® technology in the development and manufacture of their own antibodies.

Epitomics represents a highly compelling strategic fit for Abcam and supports the Company's vision of becoming the world's leading life science reagents company. The acquisition provides us with extensive know-how in rabbit monoclonal antibody technology, helps to diversify our product offering and customer base and offers the opportunity to expand into the fast growing IVD IHC market.

Epitomics's strong historic and forecast growth and high margins (annual compound growth in reported revenues of 31% over their past five financial years to December 2011 and an historic gross margin in excess of 80%) are projected to boost Abcam's future sales growth and margins. Epitomics was an existing OEM supplier to Abcam prior to acquisition and we intend to leverage Abcam's existing customer base and strong global marketing and distribution expertise with Epitomics's RabMAb® products, technology and product pipeline.

We are pleased with the results we have seen in the ten weeks since acquisition, in which Epitomics has contributed revenues of £3.2m. We expect the overall Epitomics contribution to be earnings neutral in the first full year of ownership as we invest in the business to expand production and accelerate future growth, generating earnings enhancement from the second full year of ownership onwards.

Enhancing our product ranges

Our online catalogue has continued to grow strongly, comprising 92,456 products at the year end, representing growth of 25.5% over the previous year, as we took advantage of a number of one-off opportunities to add to new and existing product ranges.

We increased our range of primary antibodies by 23.5%, which includes 1,452 new RabMAb® products added in the year from Epitomics. The year has also seen a continued expansion and diversification of our non primary antibody product offering: we increased this portfolio of antibody-related and support reagents in the year by 5,418 products, including 656 new biochemicals from Abcam Bristol, to a total of 22,063 products. Key ranges we have identified for growth, proteins and peptides and kits, increased by 33.9% and 73.2% respectively in the period.

Our aim is to make our product range the most meaningful it can be to best assist researchers to discover more. A key component in achieving this is our continued drive to source more information on our products and I am delighted to report that we again set new highs in the year, particularly in terms of the number of images added to our product datasheets as a result of in-house testing. This increased by over 50% compared with the prior year, including a large increase in the number of images added to non primary antibody products such as proteins.

We also continue to obtain product data from a variety of other sources, such as Abreviews® provided by customers, and references where our products have been used in experiments published in leading scientific journals.

Customer service

We have implemented a number of initiatives during the year to enhance our customer service offering by improving delivery times and expanding our customer and technical support teams.

We now hold inventory in a bonded-warehouse within China which has cut delivery times to our China-based customers by an average of a week. Similarly, we have doubled the frequency of shipments directly to our Hong Kong office to speed up delivery times to our customers in the rest of the Asia Pacific region. Brazil is one of our fastest growing markets and we have appointed a new local distribution partner to whom we now ship direct, in order to better serve this region.

We continue to maintain our response rates in customer service, with 99% of queries responded to within 24 hours, and we have improved our scientific support offering by expanding our Hong Kong team, giving faster response rates in the region and enhancing our ability to support more customers in Cantonese and Mandarin. A new phone system installed during the year has also allowed us to extend the available hours and foreign language support of our customer service teams by sharing calls across the different geographic offices. We are now proud to say that we have the best opening hours in our market.

Strategic development priorities

Our strategic priorities are to build on our core business, to capitalise on the opportunities from the acquisitions already made, identify new areas to expand into and if appropriate pursue further M&A activities.

Primary antibodies are still by far our largest revenue provider and I am delighted that we have been able to add so many new products during the year. The provision of high-quality well-specified antibodies is a key focus for us and we will continue to actively pursue this through our own production and third party sourcing, with a dedication to the generation and harvesting of data on these products.

We will also continue our plans to extend our catalogue range to look at other data-rich products that are applicable to our research customer base where we were primarily known for our original core antibody offerings.

The attractive characteristics of RabMAbs® from Epitomics explained above will significantly enhance both our primary antibody and assay product portfolios, as well as custom service offering.

The extension of our biochemical product range will also be a priority, as will the pursuit of the longer term opportunity in IVD IHC, which is currently in its early stages.

In order to facilitate continued business expansion, we are looking at ways in which we can improve our internal operations, systems and marketing capabilities. For example we are investing in our core IT systems and website, in order to allow our systems to continue to scale, as well as up-skilling our IT teams. Over time our customers will see an improvement in their interaction with Abcam's website as well as a more personalised user experience.

Board changes

As mentioned in the Chairman's Statement, one of the original co-founders of the Company, Tony Kouzarides, will be stepping down from the Board after next month's AGM. Tony has played a huge role in my personal development, ever since I worked in his laboratory at the University of Cambridge from 1995 to 1998, studying the BRCA2 gene associated with hereditary breast cancer. I would like to personally thank him for the central role he played in setting up the Company, the wise counsel he has offered ever since, and the enormous contribution he has made to Abcam's success over the years.

Summing up

There is no doubt that this is a golden age of biology and discovery. Almost daily we hear of breakthroughs coming from gene sequence and protein function and regulation studies that map directly to biological function, enabling huge leaps in our understanding, diagnosis and treatments for disease. Looking forward, the appetite for high quality discovery research tools can only increase, giving an abundance of opportunities for Abcam which we are well placed and excited to address.

It is not just the products that make Abcam special, but also the people; I am incredibly proud of the team that is driving Abcam forward. This year, the energy and enthusiasm of our staff turned our plans into action and we are already seeing the results of their hard work. My sincere thanks go to all our employees across the business for what has been another successful year.

Jonathan Milner

Chief Executive Officer

5 September 2012

Financial Review

Revenues of £97.8m were 17.5% ahead of last year and adjusted profit before tax was £39.0m, an increase of 20.7%. Adjusted diluted earnings per share were up by 19.2% to 15.59p.

Whilst taking important steps in the delivery of our longer-term plans, completing two acquisitions in the year, we have continued to manage the business in the short-term by focusing on providing even better value to our customers. Alongside this, we have managed our costs tightly to mitigate the impact on our profitability, and support the investment in our future plans - helping us build a stronger platform from which to grow.

Abcam's acquisitions undertaken over the past two years have givenrise to the recognition of intangible assets other than goodwill. These are amortised over their expected useful lives, with the cost recorded against research and development or administrative and management expenses as appropriate. In addition, acquisition-related professional fees have been incurred. Figures excluding these charges are referred to as 'adjusted' in this narrative to aid comparability, as summarised in the table below.

Record profitability and strong cash generation underpinned our policy to continue to distribute dividends amounting to 40% of adjusted post tax profits. The Directors have recommended payment of a total dividend of 6.05 pence per share in respect of 2011/12, representing an increase of 15.2% year-on-year.

The following table shows adjusted revenues, costs and expenses reconciled to reported IFRS revenues, costs and expenses.

Revenue

Reported revenue for the year was £97.8m, representing growth of 17.5% over the prior year, including revenues of £3.2m from Epitomics and £1.4m from Abcam Bristol in the ten weeks and nine and a half months since acquisition respectively. Excluding revenues from these two acquisitions, reported growth for the year was 11.9%, and 11.5% on a constant currency basis (assuming exchange rates for the currencies in which the Group sells had remained unchanged from 2010/11).

Gross Margin

Gross margin increased to 69.0%, compared with 67.3% in the prior year. 1.2% of the uplift comes from a combination of higher selling prices, product mix and effective cost control, 0.4% from the contribution made by Epitomics in the period since acquisition, and 0.1% from the impact of more favourable exchange rates compared to the prior year.

Operating profit and expenses

Tight cost control has enabled us to increase adjusted operating margins to 39.4% (2010/11: 38.3%). We expect the opportunities for further operational gearing to be limited and will be increasing our investment in the development of the business following the recent acquisitions.

Administration and management expenses

On a like-for-like basis, excluding the costs contributed by the two entities acquired in the year, our administration and management expenses (prior to the impact of foreign exchange gains and losses, amortisation of acquisition-related intangibles and other acquisition-related charges) were tightly controlled to an increase of only 7.6% for the year, as summarised in the table below.

The main movements in these costs arose as a result of:

·; a 36.8% increase (£0.4m) in the share-based payments charge as a result of the increase in headcount and the extension of the LTIP to senior managers;

·; a decrease of £0.5m in the provision relating to overseas bonus plans;

·; a 29.3% increase (£0.3m) in rent, rates and service charges as a result of the relocation of our Hong Kong and Japanese offices to larger premises and the expansion of our Boston office, in all three cases to accommodate growth, as well as a scheduled rent review at our laboratory facility in Cambridge, following the expiry of our initial five-year term; and

·; a saving of £0.3m compared with the prior year as a result of costs incurred in 2010/11 relating to external due diligence and consultancy on a potential acquisition which did not proceed.

Abcam Bristol and Epitomics in total contributed a further increase in administrative and management expenses of £1.8m, giving a reported increase in underlying costs of 16.1%. As a percentage of revenue, this represents a small reduction to 25.7% (2010/11: 26.0%).

Key administration and management expenses movements:

Research and development expenditure

Research and development (R&D) expenditure relates to the development of new products, as well as costs incurred in searching for and developing production process improvements. These costs do not meet the requirements to be capitalised as an intangible asset and are therefore expensed through the income statement as incurred.

Overall R&D expenditure increased by 30.4% in the year to £4.2m (2010/11: £3.2m). Of this, £1.5m was incurred in our three recently acquired entities, Abcam Eugene, Abcam Bristol and Epitomics, and £0.5m was due to amortisation of the acquisition-related intangibles attributed to patents and technological know-how. The remaining £1.0m decrease is attributable to R&D activities in our Cambridge, UK, laboratory; this is due to the implementation of further efficiencies in our processes, successful cost reduction negotiations with some of our key suppliers and a switch of resources away from monoclonal development.

Investment income and finance costs

Investment income increased in the year, reflecting the growing cash balances throughout the first nine months of the year prior to the net cash outflow of £45.1m for the acquisition of Epitomics in April 2012. In order to partially fund this acquisition, we negotiated a revolving credit facility of £20m, of which we drew down £13m, incurring finance costs of £73k in the period to the end of the year. Continued cash generation as well as the maturity of certain term deposits allowed us to fully repay this debt by the end of the year. The entire £20m facility remains in place for future drawdown as necessary, although our current plans only envisage this being required in the case of further M&A activity.

Earnings and tax

Profit before tax in 2011/12 was £34.7m or 35.4% of revenues, compared to £32.1m or 38.6% of revenues in 2010/11. Adjusted profit before tax in 2011/12 was £39.0m or 39.9% of revenues, compared with £32.3m or 38.8% of revenues in 2010/11.

The effective tax rate on adjusted profit before tax was 24.7% (2010/11: 25.7%), reflecting the benefit of announced changes to the UK corporation tax rate, R&D tax credits partially offset by the impact of higher foreign tax rates, as well as a £0.3m benefit from revised R&D tax credit claims relating to 2007/08 and 2008/09.

After taking into account the impact of £3.4m of non-deductible acquisition-related costs, as well as the deferred tax impact of acquisition-related intangible amortisation, the reported effective tax rate was 26.7% (2010/11: 25.9%).

Adjusted basic earnings per share (EPS) increased by 18.9% to 15.88p per share, and adjusted diluted EPS by 19.2% to 15.59p. The basic weighted average number of shares in issue during the period was 185.1m (2010/11: 179.9m), reflecting the additional shares issued in the year on the exercise of share options, the equity components of the consideration paid on the acquisitions of Abcam Bristol and Epitomics, and the full year effect of those shares issued at the end of 2010/11 for the acquisition of Abcam Eugene.

Balance sheet and cash flow

Goodwill and intangibles

Goodwill at 30 June 2012 was£82.4m compared with £2.1m at 30 June 2011. The increase in goodwill is primarily due to the two acquisitions that occurred during the year, with a small adjustment of £0.2m resulting from fair value adjustments made to the assets acquired in the Abcam Eugene acquisition. Goodwill is not amortised under IFRS but is subject to impairment review on at least an annual basis. During the year the directors performed the review which involved making various assumptions regardingthe future performance of the business. After considering various scenarios that could reasonably occur, the directors concluded that no impairment wasrequired. For more details, please see note 17 to the preliminary financial information. 

Other intangible assets at 30 June 2012 were £34.3m, compared to £2.1m at 30 June 2011. The movement primarily reflects amortisation of the intangible assets and the additions resulting from the acquisitions in the year, as well as the development of hybridomas for the production of monoclonal antibodies, and software costs related to the project to invest in our core IT systems, described in more detail below. Further analysis can be found in note 18 to the preliminary financial information. Other intangible assets are amortised through the income statement over their estimated useful lives, and we have added back the amortisation of acquisition-related intangible assets in arriving at adjusted profit, as outlined above.

Capital expenditure

Additions of tangible and intangible assets amounted to £3.0m (2010/11: £1.0m) reflecting:

·; the purchase of an additional Compound machine to enhance our minus 20 degree storage capacity, the temperature at which the majority of our finished goods are held;

·; the creation of a new goods-in/goods-out area in our Boston office to enhance the capacity and efficiency of this area of operations;

·; further investment in other inventory storage facilities across our distribution offices in order to accommodate the additional inventory taken on as a result of the acquisitions in the period;

·; office moves for our Hong Kong and Japanese offices to accommodate expansion, as well as redesign of our UK and extension of the Eugene laboratory facilities;

·; development of new Hybridomas by Epitomics; and

·; the first stages of an investment in our core IT systems and website.

The latter project has incurred tangible fixed asset additions of £0.1m and intangible additions of £0.8m in the year, including capitalisation of internal staff costs as required by IAS 38 of £0.1m. This investment will be instrumental in supporting the delivery of Abcam's next stage of growth and we expect to capitalise approximately £4.5m in the next twelve months or so, of which £0.5m is estimated to be internal salary costs. Whilst there may be smaller amounts of ongoing investment to support the project after 2012/13, this is planned to be the major investment year.

Cash flow

* excluding the impact of the settlement of pre-acquisition non-trading liabilities by Epitomics of £2.1m.

We maintained strong cash generation in the year, recording underlying cash generated by operations of £37.7m, at 38.5% of Group revenue (2010/11: £33.1m, 39.7% of revenue).

The underlying working capital outflow reflects an increase in inventories of £2.0m, which includes an increase to reflect the growth of the business, product mix and strategic initiatives to support improved customer service. The movement in receivables was broadly in line with the increase in revenues. Payables has decreased by £1.2m due to the payout of bonuses under overseas incentive plans and the timing of one-off project-related payments as well as other supplier payment runs.

Overall, the Group reported a net cash outflow of £38.3m (2010/11: inflow of £15.2m). The majority of this outflow arose from the £51.0m net cash paid to partially fund the acquisitions of Abcam Bristol and Epitomics in the year. The remainder of the outflows result from an increase in capital expenditure, taxation and dividends, as well as £2.1m paid in settlement of non-trading balances accrued within Epitomics's opening balance sheet and £3.1m paid for acquisition-related costs.

Net cash and term deposits at the year end totalled £17.5m, with no bank debt outstanding.

Looking ahead

We will continue to manage the company prudently and to operate an efficient business; controlling our costs tightly whilst building a platform for long-term sustainable growth.

Jeff Iliffe

Chief Financial Officer

5 September 2012

Consolidated income statement for the year ended 30 June 2012

Reconciliation of adjusted financial measures for the year ended 30 June 2012

Consolidated statement of comprehensive income for the year ended 30 June 2012

Consolidated statement of changes in equity for the year ended 30 June 2012

1 Exchange differences on translation of overseas operations.

2 IFRS 2 charge for fair value of share-based options and awards.

3 Gains and losses recognised on cash flow hedges.

4 Portion of deferred tax asset arising on outstanding share options and share options exercised and not taken to profit and loss in accordance with IAS 12.

Consolidated balance sheet at 30 June 2012

The preliminary financial information of Abcam plc, registered number 3509322, were approved by the Board of Directors and authorised for issue on 5 September 2012.

They were signed on its behalf by:

Jeff Iliffe

Director

Consolidated cash flow statement for the year ended 30 June 2012

Company balance sheet at 30 June 2012

The preliminary financial information of Abcam plc, registered number 3509322, were approved by the Board of Directors and authorised for issue on 5 September 2012.

They were signed on its behalf by:

Jeff Iliffe

Director

Company cash flow statement for the year ended 30 June 2012

Company statement of comprehensive income for the year ended 30 June 2012

Company statement of changes in equity for the year ended 30 June 2012

1 IFRS 2 charge for fair value of share-based options and awards.

2 Gains and losses recognised on cash flow hedges.

3 Portion of deferred tax asset arising on outstanding share options and share options exercised and not taken to profit and loss in accordance with IAS 12.

Notes to the consolidated preliminary financial information for the year ended 30 June 2012

1. General information

Abcam plc (the Company) is incorporated in the UK under the Companies Act 2006. The address of the registered office is 330 Cambridge Science Park, Milton Road, Cambridge CB4 0FL, UK.

The Group is a producer and distributor of high quality research-grade antibodies and associated protein research tools. The Group operates through its ultimate parent company Abcam plc and through its wholly owned subsidiaries Abcam Inc, Abcam KK, Abcam (Hong Kong) Limited, Ascent Scientific Limited, Epitomics Inc and MitoSciences Inc, allowing it to serve a global customer base of over 88 countries.

2. Adoption of new and revised standards

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in this preliminary financial information:

Standards affecting the preliminary financial information

Amendment to IFRS 7 Financial Instruments: Disclosures

The amendment clarifies the required level of disclosure around credit risk and collateral held and provides relief from disclosure of renegotiated financial assets.

Standards not affecting the reported results nor the financial position

The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on the amounts reported in this preliminary financial information but may impact the accounting for future transactions and arrangements.

IAS 24 (2009) Related Party Disclosures

The revised Standard has a new, clearer definition of a related party, with inconsistencies under the previous definition having been removed.

At the date of authorisation of this preliminary financial information, the following Standards and Interpretations which have not been applied in this preliminary financial information were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

The Directors do not expect that the adoption of these Standards and Interpretations in future periods will have a material impact on the preliminary financial information of the Group.

3. Significant accounting policies

Basis of accounting

The preliminary financial information has been prepared in accordance with IFRSs. The preliminary financial information has also been prepared in accordance with IFRSs adopted by the European Union and therefore the Group preliminary financial information complies with Article 4 of the EU IAS Regulation.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the preliminary financial information.

The preliminary financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The Group preliminary financial information is presented in Sterling and all values are rounded to the nearest thousand Pounds (£000) except when otherwise indicated. The principal accounting policies adopted are set out in the next few pages.

Basis of consolidation

The consolidated preliminary financial information incorporates the preliminary financial information of the Company and entities controlled by the Company made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair values at the date of exchange of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination that meet the recognition criteria under IFRS 3 (2008) are measured at their fair values at the date of acquisition, except that:

·; deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

·; liabilities or equity instruments relating to the replacement by the Group of an acquiree's share-based payment awards are measured in accordance with IFRS 2 Share-based Payment; and

·; assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured as per that Standard.

Investments in subsidiaries are accounted for at cost less impairment. Where applicable, cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is reviewed and tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in subsequent periods. 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. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Sales of goods are recognised when goods are despatched and title has passed.

Sales of goods that result in award credits for customers, under the Abpoints Scheme, are accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the goods supplied and the award credits granted. The consideration allocated to the award credits is measured by reference to their fair value - the amount for which the award credits could be sold separately. Such consideration is not recognised as revenue at the time of the initial sale transaction but is deferred and recognised as revenue when the award credits are redeemed and the Group's obligations have been fulfilled.

Custom service revenue is recognised when the outcome of the contract can be estimated reliably and is then based on the stage of completion of the contract activity at the balance sheet date. Where the outcome cannot be estimated reliably, revenue is recognised to the extent of costs incurred where it is probable these will be recovered. In instances where it is probable that the costs will be in excess of the contract revenue, the expected loss is recognised as an expense immediately.

Licence fee income is recognised on delivery of the licensed technology where the Group's continued performance or future research and development services are not required. Payments received prior to this are recorded as deferred revenue.

Royalty revenue is recognised based on the contractual terms and substance of the agreements with the counterparty.

Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.

Revenue derived from the Company's conferences is recognised when the conference is held; however, it is not material.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the consolidated preliminary financial information, the results and financial position of each Group company are expressed in Sterling, which is the functional currency of the Company and the presentation currency for the consolidated preliminary financial information.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for:

·; exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting); and

·; exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

For the purpose of presenting preliminary financial information, the results of the operations of the Company's overseas subsidiaries are translated at the monthly average exchange rates during the period and their balance sheets at the rates prevailing at the balance sheet date. Exchange differences arising on the translation of the opening net assets and results of operations are classified as equity and recognised in the Group's foreign currency translation reserve.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the nature of the Group's obligations under the schemes is equivalent to those arising in a defined contribution retirement benefit scheme.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes some items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the preliminary financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following bases:

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.

Intangible assets

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Expenditure on development activities including internally generated intangible assets is recognised as an asset if and only if it meets the recognition criteria set out in IAS 38 Intangible Assets.

Payments made to acquire software, distribution rights, capitalised development work and contract-based intangibles from third parties are capitalised at cost and amortised on a straight-line basis over their estimated minimum useful lives. The minimum useful life is determined to be three years in the case of software, the term of the deal in the case of distribution rights and the length of the contract for contract-based intangibles.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Investments

Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and an attributable portion of production overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the standard cost method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is made for obsolete, slow moving or defective items where appropriate.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Available for sale financial assets

The Group has an investment in unlisted shares which is not traded in an active market but is classified as AFS financial assets and stated at fair value (because the directors consider that fair value can be reliably measured).

Trade and other receivables

Trade receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Term deposits

Term deposits represent bank deposits with an original maturity of over three months.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Trade payables

Trade payables are measured at amortised cost.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments

Forward contracts are used by the Group to manage its exposure to the risk associated with the variability in cash flows in relation to both recognised assets or liabilities and forecast transactions.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the income statement depends on the nature of the hedge relationship.

A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the instrument is more than twelve months and it is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.

Hedge accounting

The Group designates certain derivatives as either hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).

At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is effective in offsetting changes in fair values or cash flows of the hedged item.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss and is included in the 'administration and management expenses' line of the income statement.

Amounts deferred in equity are recycled in the income statement in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with IFRS 1, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 July 2006.

Incentives in the form of shares are provided to employees under share option, SIP and LTIP. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest.

Fair value of options issued under the Group's share option schemes is measured by the use of the Monte Carlo Simulation.

Fair value of the awards under the Group's LTIP is measured by the use of the Monte Carlo Simulation for the TSR portion and the Black Scholes Model for the EPS portion.

Fair value of an equity-settled payment under the SIP is measured as the face value of the award on the date of grant.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Charges made to the income statement in respect of share-based payments are credited to retained earnings.

The Group operates an employee benefit trust as part of its incentive plans for UK-based employees. All assets and liabilities of the trust are recorded in the balance sheet as assets and liabilities of the Company until such time as the assets are awarded to the beneficiaries. All income and expenditure of the trust is similarly brought into the results of the Company.

Own shares

Own equity instruments which are acquired are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration is recognised in reserves.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities as at the date of reporting the preliminary financial information, and the reported amounts of revenues and expenditure during the year. In preparation of the consolidated preliminary financial information, estimates and assumptions have been made by the Directors concerning the fair value of share options, the estimated useful lives of fixed assets, accruals and provisions required, the carrying value of investments, the recoverability of deferred tax assets, the carrying value of goodwill and other intangible assets and other similar evaluations. Actual amounts may differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of intangibles

As part of the business combinations during the year, the Group acquired the following intangible assets: licence fees, customer relationships, patents, trade names, technology and know-how. Further to this the Group has begun to capitalise IT development costs relating to the rebuilding of the Group's IT core systems, since these costs meet the recognition criteria of IAS 38. The Group reviews the carrying amount of all intangible assets held at each balance sheet date and no impairment was considered necessary for these assets.

Impairment of goodwill

The Group determines whether goodwill is impaired on at least an annual basis or more frequently when there are indications of possible impairment. The impairment review requires a value in use calculation of the cash-generating units to which the goodwill is allocated. In estimating the value in use, management is required to make an estimate of the expected future cash flows attributable to the cash-generating unit and to choose an appropriate discount rate to calculate the present value of those cash flows. The carrying amount of goodwill at 30 June 2012 was £82,356,000 (2011: £2,062,000). Further details are given in note 17.

Fair value of derivatives and other financial instruments

As described in note 27, the Directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument. Other financial instruments are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates.

Valuation of own manufactured inventory

The standard costs used for the valuation of own manufactured inventory require a number of assumptions concerning the allocation of overheads. These assumptions are based primarily on management's estimates of time spent in each relevant area of activity and normal levels of activity.

Provision for slow moving or defective inventory

The provision for slow moving or defective inventory is based on management's estimation of the commercial life and shelf life of inventory lines. In assessing this, management takes into consideration the sales history of products and the length of time that they have been available for resale.

5. Income statement for the Company

As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own income statement for the year. Abcam plc reported a profit for the year ended 30 June 2012 of £24,501,000 (2011: £23,929,000).

6. Revenue

An analysis of the Group's revenue, all of which derives from continuing operations, is as follows:

7. Operating segments

Products and services from which reportable segments derive their revenues

The Directors consider that there are no identifiable business segments that are engaged in providing individual products or services or a group of related products and services that are subject to risks and returns that are different to the core business. The information reported to the Group's Chief Executive Officer, who is considered the chief operating decision maker, for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment under IFRS 8, which is 'sales of antibodies and related products'. The Group's revenue and results and assets for this one reportable segment can be determined by reference to the Group's income statement and balance sheet.

The Group has no individual product or customer which comprises more than 10% of its revenues.

Geographical information

The Group's revenue from external customers and information about its non-current segment assets (excluding deferred tax and derivative financial instruments) by geographical location is detailed below:

Revenues are attributed to countries on the basis of the customer's location. No country included within 'Other countries' contributes more than 5% of the Group's total revenue.

8. Profit for the year

Profit for the year has been arrived at after charging/(crediting):

9. Auditor's remuneration

A detailed analysis of the auditor's remuneration on a worldwide basis is provided below:

1 Other services relates to training provided by the not-for-profit organisation Cambridge Network Limited and its subsidiaries. This is disclosed due to the audit partner also being a director of the Cambridge Network Limited. Consistent with the not-for-profit status, neither the audit partner nor Deloitte receives any remuneration in relation to this arrangement.

Details on the Company's policy on the use of the auditor for non-audit services are set out in the Audit Committee Report. During the year, the auditor was used for due diligence work as this was considered most beneficial to the Group due to the auditor's established knowledge and experience of the Group's activities. The auditor's independence and objectivity was safeguarded through the use of separate engagement teams. No services were provided pursuant to contingent fee arrangements.

10. Staff costs

The average monthly number of employees (including Executive Directors) was:

Their aggregate remuneration comprised:

*£65,000 (2011: £nil) relates to Group staff costs directly attributable to the rebuild of the IT core systems being capitalised as part of an internally generated intangible asset under IAS 38 (see note 18).

11. Investment revenue

12. Finance costs

13. Operating lease arrangements

At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, all of which relate to land and buildings, which fall due as follows: