Preliminary Results

12 September 2016

 ABCAM PLC

Strong revenue performance enabling investment for future growth

Abcam plc ("Abcam" or "the Company", AIM: ABC), a global leader in the supply of life science research tools, is pleased to announce its preliminary results for the year ended 30 June 2016 [1] .

FINANCIAL HIGHLIGHTS

· Catalogue revenue increased by 17.4% on a reported basis to £159.0m (FY 2015: £135.4m). On a constant exchange rate (CER)* basis the increase was 14.4%

· Total revenue increased on a reported basis by 19.2% to £171.7m (FY 2015: £144.0m). On a CER basis the increase was 15.9%

· Slight reduction in gross margin at 70.2% due to exchange rates (FY 2015: 70.5%)

· Reported EBITDA margin was 33.6% (FY 2015: 37.3%. Adjusted EBITDA margin** was 34.9% (FY 2015: 37.6%), the movement in which reflects the expected operational investment in Firefly and AxioMx and the impact of foreign exchange rate movements

· Reported diluted earnings per share (EPS) was 18.53 pence (FY 2015: 18.57 pence), reflecting previously announced investment in systems and processes and acquisition and integration costs. Adjusted EPS** increased by 13.1% to 22.35 pence (FY 2015: 19.76 pence)

· Closing cash and term deposits were £70.7m (30 June 2015: £58.7m)

· Proposed full year dividend increased by 8.5% to 8.91 pence per share (FY 2015: 8.21 pence)

OPERATIONAL HIGHLIGHTS

· RabMAb® primary antibody and non-primary antibody revenues grew on a CER basis by 29.5% and 30.3% respectively, demonstrating progress in executing our strategy, delivering at the top end of our key performance indicator (KPI) targets

· Acquisition of AxioMx completed and integration of its technology platform progressing well

· Introduced direct service in Singapore to provide technical support and customer services, expanding the Group's presence in the Asia Pacific region

· Signed a licence and supply agreement with Horizon Discovery Group plc for knockout cell lines, raising antibody validation standards to improve quality for researchers

· Expanded existing facility in Boston, USA, with new laboratory space and relocated and integrated the Firefly team

· Relocated the Hangzhou team to a new production facility to increase handling capacity

· Our step change investment in systems and processes to scale the business for future sustained growth is underway

Commenting on the preliminary results, Alan Hirzel, Abcam's Chief Executive Officer, said:

"We continue to move toward our ambition of becoming the most influential life sciences company for researchers worldwide. It has been a significant year for Abcam where we have delivered two times or better market growth in every geography and product category in which we operate. We see further opportunities for growth and we are investing in the long term future of the Company." 

* CER calculated assuming that exchange rates for the currencies in which the Group trades had remained unchanged from FY 2015

** Excluding acquisition costs, acquisition integration costs, the initial incremental costs associated with the investment in systems and processes and prior year R&D tax credits. In the case of diluted earnings per share also excluding acquisition related amortisation, the expense related to the unwinding of the discount applied on deferred consideration for AxioMx and the associated tax effects of adjusting items. See the section below headed Our Financials for more detail.

[1] This announcement, including any information included or incorporated by reference in this announcement, may contain forward-looking statements (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning) which are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Abcam group. All statements other than statements of historical facts may be forward-looking statements and should not be treated as guarantees of future performance. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of the Abcam group, and there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements speak only as at the date of this announcement and accordingly undue reliance should not be placed on such statements. The Abcam group does not assume any obligation to, and does not intend to, revise or update these forward-looking statements, except as required pursuant to applicable law.

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Notes for editors:

About Abcam plc

As an innovator in reagents and tools, Abcam's purpose is to serve life science researchers globally to achieve their mission, faster. Providing the research and clinical communities with tools and scientific support, the Company offers highly validated biological binders and assays to address important targets in critical biological pathways.

Already a pioneer in data sharing and ecommerce in the life sciences, Abcam's ambition is to be the most influential company in life sciences by helping advance global understanding of biology and causes of disease, which, in turn, will drive new treatments and improved health. Two-thirds of the world's 750,000 life science researchers use Abcam's affinity binders, reagents, biomarkers and assays and the Company's products are mentioned in over 20,000 of the 56,000 peer-reviewed papers published each year in the life sciences.

By actively listening to and collaborating with researchers, the Company continuously advances its portfolio to address their needs. A transparent programme of customer reviews and datasheets, combined with an industry-leading validation initiative, gives researchers increased confidence in their results.

Abcam's twelve locations are located in the world's leading life science research hubs, enabling local services and multi-language support. Founded in 1998 and headquartered in Cambridge, UK, the Company sells to more than 100 countries. Abcam was admitted to AIM in 2005 (AIM: ABC).

To find out more, please visit www.abcam.com and www.abcamplc.com

Forward looking statement

This announcement, including any information included or incorporated by reference in this announcement, may contain forward-looking statements (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning) which are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Abcam Group. All statements other than statements of historical facts may be forward-looking statements and should not be treated as guarantees of future performance. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of the Abcam Group, and there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements speak only as at the date of this announcement and accordingly undue reliance should not be placed on such statements. The Abcam Group does not assume any obligation to, and does not intend to, revise or update these forward-looking statements, except as required pursuant to applicable law.

CHAIRMAN'S INTRODUCTION

Abcam has reported another year of strong revenue growth and the Board believes the Group is well positioned to continue delivering sustainable returns as it continues to invest to support the next chapter of growth.

Reflecting on the performance over the year, I am delighted to say that the business has performed very well, meeting both its strategic and financial objectives.

Strategic execution

Over the past three years we have been reshaping our business and believe the results we report this year show that our strategic direction is the right one. We have grown in all of our geographic regions and product categories, whilst continuing progress against each of our strategic goals.

Abcam is a rapidly growing organisation which places new demands on our existing systems and processes. We are investing in new capabilities in order to support continued growth and realise the opportunities in the markets in which we operate. In particular, we are investing in scalable and flexible IT systems and have chosen a cloud-based enterprise resource planning (ERP) platform, as well as a primary implementation partner.

We believe our strategy is strengthening Abcam's position at the heart of life science research worldwide. We expect to continue to grow organically and, where we see technologies and businesses that fit our business model, through partnering and acquisition. Our recent acquisition of AxioMx is a good example of where we identified a company with a new technology that potentially allows us to add further value to the research, diagnostic and therapeutic communities. This technology has the potential to produce highly validated recombinant monoclonal antibodies within weeks - a significantly shorter timeframe than is possible with current in vivo technology. The Board is pleased with the progress being made and the first AxioMx products are already on Abcam's catalogue.

Our strategy is designed to increase revenue growth and improve the long-term financial performance of the business, in support of our ambition to become the most influential life sciences company supporting researchers. Each year we set ourselves challenging targets and, once again, we have achieved results at the top end of these targets.

Dividend

The Board is proposing a final dividend of 6.556 pence per share (FY 2015: 5.92 pence per share). Added to the interim dividend of 2.354 pence per share, this brings the total dividend for the financial year ended 30 June 2016 to 8.91 pence per share, representing an increase of 8.5% growth over the previous year. The dividend will be paid on 2 December 2016 to shareholders on the register on 11 November 2016. The associated ex-dividend date is 10 November 2016.

Governance

Achieving high standards of governance is fundamental to the successful growth of our business. The establishment of a Company Secretariat has enabled additional focus to be given to corporate governance. Even though it is not a requirement for an AIM-listed company, we continue to comply in all material respects with the UK Corporate Governance Code (Code).

As a Board, we have focused on enhancing our effectiveness and implementing the new requirements of the 2014 edition of the Code, which apply to us for the first time this year. These include defining our risk appetite and conducting a broader risk assessment in the context of assessing our longer-term financial viability.

We regularly review ways to improve the effectiveness of the Board and its Committees and a thorough and detailed internal evaluation was undertaken this year.

Strong leadership and dedicated employees

Our Company has grown significantly over recent years and now employs over 900 people in twelve locations. During the year we have made key appointments across the business to broaden our product development and digital marketing expertise. We also expanded our legal and diagnostics teams, and appointed a global head of HR to ensure that we continue to attract and retain the best talent worldwide.

Our Board has also been strengthened with the addition of Mara Aspinall, who joined us in September 2015 as a Non-Executive Director, and she has already made significant contributions to the business.

During the course of the year our Chief Operating Officer (COO), Jim Warwick, and our Chief Financial Officer (CFO), Jeff Iliffe, announced their intention to leave Abcam and step down from the Board. Both have played a huge role in the Company's success, with Jim being an integral part of the business for more than 15 years and Jeff similarly since being appointed CFO in 2007. I would like to thank them for all their hard work during their time at Abcam and their continued dedication to the business through an efficient transition. Jeff has ensured an orderly handover to Gavin Wood, who joined Abcam as CFO-elect on 18 July 2016, and will become CFO on 12 September. Jim is remaining with Abcam until the end of 2016 to ensure that the initial build and design phase of our new ERP programme is completed.

In August 2016, Anthony Martin and Michael Ross advised the Board of their intention not to seek re-election as Directors at the forthcoming AGM. I would like to thank them both for the significant roles they have played during their service on the Board of Abcam. Their insight and support have been extremely valuable and we wish them well in their future endeavours.

The successful transformation of our business to date is a result of the hard work, enthusiasm and dedication of all of our employees. My thanks to them and to our shareholders, who have continued to support the business through a period of investment and growth.

I would also like to thank my Board colleagues for their guidance and oversight of the business and the Executive Leadership Team for continuing to deliver strong business performance while successfully executing on the strategic priorities.

Creating future sources of value

We listen to our consumers and focus on identifying the biological pathways and targets of greatest interest to them, whilst working to ensure our products are of the highest quality, accompanied by relevant supporting data. This approach has resulted in Abcam remaining the leading primary antibody supplier to the life science research market. Favourable macroeconomic trends and our investment strategy combine to support the growth of our innovative products. While operating in a competitive marketplace, comprised of both private and public companies, we continue to gain market share.

We are making good progress against long term strategic priorities and growth objectives. We have a strong history of growth through acquisition and our most recent company acquisitions, Firefly BioWorks and AxioMx, whilst still in an investment stage, are beginning to deliver results. We will continue our programme of investment in our systems and processes, as well as in our facilities, to ensure that we have the infrastructure to support the growth of the business and we are confident that we can continue to build significant value for all of our stakeholders.

Murray Hennessy

Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW: HOW WE DELIVERED VALUE THIS YEAR

We are building Abcam for success in the life science market of today and tomorrow by creating a scalable platform that will enable us to continue to grow over the long term.

The Company has transitioned from being a small high growth company to being a significant player in our core markets, with future expansion potential through targeted investment. Abcam is the market leader in primary antibodies for use in research. It is our goal to continue to grow the Company and create value for all of our stakeholders. We have a strong track record of delivering on our promises and we will continue to focus on understanding our customers, delivering high quality products, and being the innovation partner of choice for the researchers we serve globally.

A clear direction

In 2014 we laid out the strategy that has subsequently seen Abcam become increasingly successful, bearing testament to the hard work of all our employees across the Company. Each year we set ourselves challenging goals and I am pleased to say that in FY 2016 the achievement against our KPI targets was at the top end of the target range, or above, in each category.

Our strategic priorities

Our strategy is designed to generate sustainable sales and earnings growth and improved returns to shareholders.

We have five strategic priorities:

· to grow our core reagents business faster than the market;

· establish new growth platforms;

· scale organisation capabilities;

· sustain attractive economics; and

· selectively pursue partnerships and acquisitions.

Innovation and future growth

We continue to focus on our broad portfolio of tools to enable research into the role of signalling and regulatory molecules and proteins in biological pathways.

We analyse data and research trends to develop products that fit the requirements of our consumers. We package these products in a format that suits their needs, making it easier and faster for them to complete their work. This approach is driving new product sales.

Our proprietary, high quality RabMAb® technology continues to be an important differentiator for the business. We increased our ranges of RabMAb® antibodies and SimpleStep ELISA® assay kits which contain RabMAb® antibodies.

During the year we also launched a suite of matched antibody pairs in a standalone format. These products provide greater flexibility to researchers and allow cost-effective drug discovery.

Expanding the global reach of our products is fundamental to our organic growth plans. In addition to extending our geographic outreach in China, during the year we have also introduced a direct supply model in Singapore.

The diagnostics market is an area where we see an opportunity for expansion and is one where we have seen success. Abcam's work with global pharmaceutical and diagnostic companies to develop and produce companion diagnostic antibodies to targets such as PD-L1, is a prime example.

PD-L1 is an important target in difficult to treat cancers such as melanoma and lung cancer and Abcam's RabMAb® technology has played a key role in helping diagnostic companies to offer specific diagnostic antibodies targeting PD-L1 to the clinic. Abcam worked on several bespoke projects in partnership with large pharmaceutical companies to develop highly specific RabMAb® antibodies to the target. In addition to these clinical uses, PD-L1 RabMAb® product (clone 28-8) is now also available on our website for research use and in its first year has become one of the most cited antibodies of its type.

Creating value through acquisition and partnering

Abcam has a strong track record of delivering growth through acquisition and partnership deals. The Company actively seeks to partner with entities that offer complementary products or capabilities in the life science market.

We have clear criteria when considering opportunities. In addition to being able to generate an appropriate return on investment for our shareholders, we look for new innovative growth platforms and/or new expertise that we can leverage.

The acquisitions of MitoSciences and Epitomics gave us an enhanced immunoassay portfolio and intellectual property for RabMAb® production capacity respectively, both of which have made significant contributions to Abcam's growth.

Our more recent acquisitions, whilst both still in an investment stage, are already beginning to deliver results. We acquired Firefly BioWorks in January 2015 and, later that year, launched microRNA (miRNA) assays using the Firefly® technology. These allow measurement of multiple miRNA assays with fewer steps than conventional assays. This technology is starting to deliver, largely through our sample testing services, and is also in use in customers' own laboratories.

We have already seen several publications using the technology, including a paper describing the development of miRNA biomarkers for cardiac toxicity in drug development. We are also developing multiplex immunoassays using the Firefly® technology and are beta testing these products with researchers. The Firefly® multiplex immunoassays, enabling efficient measurement of multiple proteins, will complement our SimpleStep ELISA® and Matched Antibody Pair product lines, which offer rapid testing and a flexible format respectively. Our RabMAb® antibodies are incorporated in all of these products and they are developed at our Eugene, Oregon site, which was added in the MitoSciences acquisition in 2011.

AxioMx, which we acquired in November 2015, offers in vitro recombinant monoclonal antibody technology which complements Abcam's existing antibody and immunoassay capabilities by targeting attractive and growing markets that traditional in vivo antibody production methods struggle to address. In addition to opening new markets, AxioMx capabilities have the potential to deliver high quality antibodies within weeks, which is significantly faster than is possible using in vivo methods. The team has made good progress since the acquisition from both a commercial and technical perspective, with new AxioMx technology-based developments for SimpleStep ELISA® with matched antibody pair and conjugated product lines all being initiated. The plan for additional products focusing on new targets is in progress and the first AxioMx developed products are now on the catalogue.

It is part of our strategy to pursue further acquisitions and collaborations where they will create additional value for the business and our stakeholders.

Investing for the future

Abcam is a rapidly growing organisation and it is important that we have the infrastructure to support this growth both from a systems and processes perspective. Key to this is the implementation of a comprehensive ERP system. During the period, we have gone through an extensive selection process both of the platform and for an implementation partner. We have chosen Oracle Fusion as the core cloud-based ERP software provider and have also appointed our primary implementation partner. The detailed design phase of the project is nearing completion and we have already begun to build certain modules in line with a phased approach to roll-out. We believe the investment will give us multiple advantages, including allowing us to scale the business without increasing the headcount by as much as would otherwise be the case; improving consumer interaction and conversion; better information for decision making; and a significant improvement in integrating and delivering value from any future strategic acquisitions or investments.

Additionally, we have made enhancements to some of our facilities to fit the needs of our growing organisation. We have increased handling capacity through our investment in the relocation of our Hangzhou production facility and have integrated the Firefly team into the same building as our existing facility in Boston, USA.

Our headquarters in Cambridge, UK, are currently spread across three sites. In August 2016, outline planning permission was obtained for a new building on the Cambridge Biomedical Campus, which would enable us to consolidate into a single site, with sufficient space to accommodate our current and future needs.

Markets

The global life science research tools market is estimated to be $2.7bn and we continue to be the leader in the estimated $900m primary research antibodies market segment, supported by strong growth in RabMAb® antibodies. We have also been successful in delivering significant revenue growth from our non-antibody products.

The table below shows our revenues from a geographical point of view based on the location of our customers.

1 Custom products and licensing revenues were previously known as non-product revenues but have been re-named to better reflect the nature of this income. This includes revenues from custom services, IVD and licences.

Values and our people

Abcam is a rapidly growing company and key to our success is the quality of our people and the way we conduct our business. Our global headcount has increased to over 900 employees and we have attracted strong talent to the Company and built solid capabilities which are underpinning the long-term growth of the business.

Outlook

To ensure we are able to capitalise fully on the opportunities available to us, we continue to work closely with our consumers and invest in R&D, our employees, our IT and our infrastructure to provide innovative, trusted and improved solutions.

Supported by a clear purpose and strategy we believe that Abcam is well positioned to continue delivering long-term value for our stakeholders.

Alan Hirzel

Chief Executive Officer

OUR STRATEGIC PRIORITIES

Our strategy is designed to increase growth and improve our long-term financial performance, in support of our ambition to become the most recommended brand by life science researchers.

OUR KPIs

We measure our performance against a number of KPI targets. Success against these KPIs forms a component of the Executive Directors' and senior management's incentives.

RabMAb® primary antibodies CER revenue growth

Strategic alignment: 1, 2, 4, 5

29.5%

How we performed

At a constant exchange rate (CER) growth rate of 29.5%, our RabMAb® revenues have outperformed our high expectations in the year.

Non-primary antibody products CER revenue growth

Strategic alignment: 2, 5

30.3%

How we performed

Led by our kits and assays business, non-primary antibody CER revenue growth was 30.3%, outperforming our high expectations.

Net Promoter Score (NPS)

Strategic alignment: 1, 2

26%

How we performed

We conducted several formal consumer surveys during the year to determine the likelihood of consumers recommending Abcam's products and services to a colleague. The balance of promoter and detractors is then computed into an NPS using standard industry methods. Our NPS improved by two percentage points to 26%. We have moved from eighth to fifth ranked in market, and remain focused on further advancement.

Market position

Strategic alignment: 1, 2, 5

#1 in primary research antibodies

Ongoing targets:

· Maintain #1 position in primary research antibodies

· Gain share in at least two other product categories

How we performed

Market research has confirmed that we remain the #1 company for research antibodies and that we continue to gain market share across all other categories.

OUR FINANCIALS

Reported revenues for the year increased by 19.2% to £171.7m. At constant exchange rates (CER) revenue growth was 15.9%, with sales from catalogue products 14.4%. Adjusted profit before tax, which includes the research and development activities of AxioMx, which was acquired during the period, and Firefly BioWorks, acquired in November 2015, increased by 8.5% to £53.8m (FY 2015: £49.6m). The reported profit before tax for the year fell by 1.5% to £45.4m (FY 2015: £46.1m), after costs of the previously announced investment in systems and processes, acquisition-related costs and prior year R&D credits. A reconciliation between these figures is given in the table below.

Revenue growth has continued to benefit from our strategy of supplying high quality products with clear, supporting data to our consumer insight to ensure product relevancy. This has been complemented by further investment to build our capabilities in regional commercial teams, IT and R&D in pursuit of our strategy.  

The table below shows a reconciliation to IFRS measures for costs, expenses and profit for the last two years. These have been adjusted to exclude acquisition-related costs arising on the acquisitions of Firefly in FY 2015 and AxioMx in FY 2016, the amortisation of acquisition-related intangible assets across the Group, the incremental costs associated with the improvement of systems and processes and R&D tax credits recognised in FY 2016 relating to prior years.

We believe that disclosing such non-IFRS measures enables a reader to isolate and evaluate the impact of the items detailed above on the financial performance of the Company. We believe that this provides valuable additional information and allows for a fuller understanding of performance from year to year.

Adjusted income statement

Note 1: Acquisition-related costs comprise costs of acquisition, acquisition-related intangible amortisation, acquisition integration costs, and in FY 2016, for AxioMx, the expense related to the unwinding of the discount applied on the deferred consideration.

Revenue

Reported revenues for the year increased by 19.2% to £171.7m. Overall, Sterling was weaker than last year against the currencies in which the Group trades. Adjusting for this, CER revenue growth was 15.9% (FY 2015: 12.6%).

Gross margins

Reported gross margin was down very slightly to 70.2% (FY 2015: 70.5%) due to exchange rate movements over the period.

Administration and management expenses

As indicated last year, FY 2016 has been a period of continued investment in our capabilities to drive medium and long-term growth and this has increased our cost base.

The adjusted administration and management expenses increased by £11.2m to £55.2m. The notable components of the increase are:

· the reported cost increases owing to the relative weakness of Sterling referred to above, together with net currency losses in the year including from forward selling contracts, contributed a £2.5m increase in reported costs;

· strengthening the commercial teams, with particular focus on under-penetrated consumer segments and local office costs to support geographic expansion, such as in Shanghai and Singapore together added £2.0m;

· IT-related costs to support business expansion added £1.4m; and

· the incremental costs from Firefly and AxioMx added a further £0.9m.

The remainder of the increase principally relates to supporting the growth in activity and the full year effect of costs incurred in FY 2015.

Research and development expenditure

Research and development (R&D) expenditure relates to the development of new products, as well as costs incurred in identifying and implementing 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.

The reported level of R&D expenditure increased to £12.8m in FY 2016 from £9.9m in FY 2015. After adjusting for a credit to costs from an R&D tax credit election relating to prior years, and the increase in amortisation charges of acquisition-related intangible assets, the level of R&D in the adjusted income statement grew from £8.2m in FY 2015 to £11.7m in FY 2016.

The main contributor to this £3.5m increase was £2.9m additional investment in the technology of AxioMx (acquired in November 2015), and Firefly BioWorks Inc. (acquired in January 2015). Both of these are relatively early stage businesses with technologies which we believe have the potential to be significant contributors to Abcam's growth in future years. The remaining £0.6m includes an increase in costs of product validation chiefly attributable to investment in enhancing product quality, including in IVD-related and custom service activities. 

Investing in systems and processes

The growth which has been delivered in recent years has placed new demands on the organisation, systems and processes that support our business. Consequently, as previously announced, we are investing in building enhanced capabilities and systems to realise the opportunities that we see to grow the business. The programme involves the deployment of enterprise-wide change to our systems and processes, with Oracle Fusion as the core software, and the reshaping of some of our internal functions.

In FY 2016, we have incurred capital expenditure of £5.5m on the project and incremental revenue costs of £4.0m.

Earnings and tax

The adjusted profit before tax for the year was £53.8m, on which the effective tax rate was 16.0% (FY 2015: £49.6m and 19.8% respectively). The tax charge includes prior year adjustments which reduced the charge for the year by £2.8m and the effective rate by 5.2%.

After taking into account the acquisition-related costs, incremental costs associated with the systems and processes improvements and the treatment of prior year R&D tax credits, the reported effective tax rate would be 17.6% (FY 2015: 18.9%).

Balance sheet

Goodwill and other intangibles

Goodwill at the year-end was £112.5m (FY 2015: £85.2m after restatement following the finalisation of fair values of assets arising on the acquisition of Firefly). Of the increase, £11.8m arose on the acquisition of AxioMx and £15.4m from exchange rate movements due to the US Dollar being the predominant functional currency of the acquired companies to which the goodwill relates.

The acquisition of AxioMx did not give rise to an additional cash-generating unit (CGU) as acquired businesses are integrated into the Group operations and product portfolio. The goodwill resulting from the acquisition has been allocated to the CGU for the existing Abcam business. Goodwill is not amortised under IFRS but is subject to impairment review at least on an annual basis. Consequently, during the year, the Directors performed a review which involved making various assumptions regarding the future performance of the business. After considering various scenarios that could reasonably occur, the Directors concluded that no impairment was required. For more details, please see note 12 to the financial statements.

Other intangible assets at 30 June 2016 were £70.2m (FY 2015: £44.8m). The increase primarily reflects the value attributed to patents, technology and know-how held by AxioMx and exchange rate movements arising because the functional currency of the related assets is predominately US Dollars.

The amortisation charge on acquisition-related intangible assets was £3.7m (FY 2015: £3.1m), the increase being partly because the functional currency of those assets is also predominantly US dollar, and from the acquisition of AxioMx during the period. The amortisation charge on the other intangible assets was £3.8m (FY 2015: £2.0m), including £1.3m of accelerated amortisation of existing software which is included within the incremental costs of system and process improvement.

Intangible assets are amortised over their estimated useful lives from the point at which commercial product is available for release to a wide customer base. The amortisation of acquisition-related intangible assets has been added back in arriving at adjusted profit, as outlined above.

The consideration arising on the acquisition of AxioMx includes an element of performance based payments, which are carried on the balance sheet as contingent consideration and fees of £10.9m (30 June 2015: £nil).

Capital expenditure

Property, plant and equipment and intangible assets increased by £10.1m (FY 2015: £7.7m), in addition to the £5.5m arising from the investment in systems and processes referred to above and the acquisition of AxioMx. This includes the relocation of our production facility in Hangzhou, China, to a nearby site, and reflects continued investment in support of our organic growth strategy, to improve product characterisation and drive quality, both of which are long-term growth drivers.

As previously announced, we plan to lease a new purpose-built building on the Biomedical Campus in Cambridge, UK, and the capital expenditure figure in the year also includes £0.6m on the design and plans for this facility.

Cash flow

Our track record of strong cash generation continued in the year and the period ended with an increase in net cash and term deposits of £12.0m to £70.7m (FY 2015: £58.7m) after funding the acquisition of AxioMx for a cash investment of £6.3m and acquisition fees of £0.5m. There was no bank debt (30 June 2015: £nil).

Cash generated by operations was £56.8m (FY 2015: £48.9m), after a working capital outflow of £3.1m (FY 2015: £7.5m) which includes £1.5m paid to settle pre-acquisition liabilities of AxioMx. Also within this figure was a £1.3m reduction in inventories which was achieved as a follow-on to the initiative, which began last year, to more closely align inventory levels to customer demand.

Looking forward

The revenue growth which the business has delivered in recent years is a measure of the continuing success of our strategy, and supports the underpinning capital and operational investments being made in capabilities, systems and process. This investment will provide the appropriate environment for the delivery of our strategy and enable operational efficiencies. We are confident that our strategy will continue to deliver both sustainable growth and value to our stakeholders.

Jeff Iliffe

Chief Financial Officer

Consolidated income statement

For the year ended 30 June 2016

Consolidated statement of comprehensive income

For the year ended 30 June 2016

Balance sheets

As at 30 June 2016

1 See note 3 for details.

The preliminary financial information of Abcam plc, registered number 3509322, was approved by the Board of Directors and authorised for issue on 9 September 2016.

They were signed on its behalf by:

Jeff Iliffe

Director

Consolidated statement of changes in equity

For the year ended 30 June 2016

1 Exchange differences on translation of overseas operations and net foreign investment hedges.

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

3 Gains and losses recognised on cash flow hedges.

4 Portion of tax asset arising on outstanding share options and share options exercised.

Company statement of changes in equity

For the year ended 30 June 2016

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

2 Gains and losses recognised on cash flow hedges.

3 Portion of tax asset arising on outstanding share options and share options exercised.

Cash flow statements

For the year ended 30 June 2016

1 Certain Company cash flow movements have been reallocated in order to provide consistency with current year presentation; £18,738k being reallocated from cash from operating activities to investing activities to better reflect the nature of cash flows.

Cash and term deposits at end of year comprise:

Notes to the Preliminary Financial Information

For the year ended 30 June 2016

1. Presentation of the preliminary financial information

a. General information

Abcam plc (the Company) is incorporated and domiciled 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 Company is a public limited company which is listed on the London Stock Exchange Alternative Investment Market (AIM).

The Company and its subsidiaries (together the Group) produce and distribute high quality research-grade antibodies and associated protein research tools. The Group operates through its ultimate parent company Abcam plc and through a channel of wholly owned manufacturing and distribution subsidiaries mainly based in the US and Asia Pacific, which allows it to serve a global customer base of over 100 countries. A list of all subsidiaries is contained in note 15.

b. Basis of preparation

The preliminary information of Abcam plc is prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS, and comply with Article 4 of the EU IAS Regulation.

The preliminary financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The Group preliminary information is presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The accounting policies adopted in the preparation of the preliminary financial information are consistent with those followed in the preparation of the statements for the year ended 30 June 2015 except where disclosed otherwise in this note.

The results shown for the year ended 30 June 2016 and 30 June 2015 are audited. The consolidated financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts of the Company in respect of the financial year ended 30 June 2016 were approved by the Board of directors on 9 September 2016 and will be delivered to the Registrar of Companies in due course. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph nor any statement under Section 498 of the Companies Act 2006.

c. Fair value adjustment in respect of prior period acquisition

During the period a study was undertaken to assess the extent to which pre-acquisition tax losses of Firefly Bioworks Inc can be carried forward following the purchase of that company by the Group. Carried forward losses of $7.6m have been deemed available for future utilisation against the taxable profits of the consolidated US group with no restriction other than timing, resulting in a fair value deferred tax asset of £1.9m being recognised. The deferred tax asset has been recognised on the basis that the Directors are confident that there will be sufficient temporary differences against which these losses can be utilised. The deferred tax asset in relation to losses assessed within the measurement period has been recognised as if this position had been concluded at the date of acquisition, in line with the IFRS 3 requirements. This has meant a restatement of the Group's balance sheet at 30 June 2015 to recognise the increase in deferred tax asset and corresponding decrease in goodwill. See note 29 for the restated acquired balance sheet.

d. Going concern

The Group meets its day-to-day working capital requirements from the cash surpluses generated as a result of normal trading. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the limits of its available resources.

Having assessed the principal risks and other matters discussed in connection with the budget and forecast covering the next five years, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the Group's preliminary financial information.

2. Changes in accounting policy and disclosures

New standards, amendments and interpretations adopted by the Group and the Company

In the current year, the Group and the Company have adopted the following new and revised standards, amendments and interpretations which have been assessed as having no financial or disclosure impact on the numbers presented:

IFRS 10 Consolidated Financial Statements (Amendment)

IFRS 12 Disclosure of Interests in Other Entities (Amendment)

IAS 1 Presentation of Financial Statements (Amendment)

IAS 16 Property, Plant and Equipment (Amendments)

IAS 27 Separate Financial Statements (Amendment)

IAS 28 Investment in Associates and Joint Ventures (Amendment)

Improvements to IFRSs (September 2014)

New standards, amendments and interpretations not yet adopted

At the date of authorisation of this preliminary financial information the following standards and interpretations were in issue but not yet effective, and have not been applied in preparing this preliminary financial information:

1 In December 2015 the IASB postponed the effective date of these amendments indefinitely pending the outcome of its research project on the equity method of accounting.

The standards and interpretations above have not been applied in preparing this preliminary financial information and the Directors do not expect that their adoption in future periods will have a material impact on the preliminary financial information of the Group, with the exception of the potential impact of IFRS 16 Leases and IFRS 15 Revenue from Contracts with Customers, which the Directors are still assessing.

3. Significant accounting policies

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 when the Company has power over the entity and the ability to use its power to affect the returns it receives from its involvement with the entity.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Where necessary, adjustments are made to the preliminary financial information of subsidiaries to bring the accounting policies in line with those used by the Group. All intra-group transactions, balances, equity, income and expenses are eliminated on consolidation.

Business combinations

Business combinations are accounted for using the acquisition method. On the acquisition of a business, fair values are attributed to the identifiable assets and liabilities and contingent liabilities unless the fair value cannot be reliably measured in which case the value is subsumed into goodwill. The consideration transferred for the acquisition includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Contingent consideration may include specific research and development or other operational milestones and/or financial targets. Each element is fair valued at the date of acquisition using actual and projected data and statistical techniques. Key inputs include probability of success and consideration of expected timing. Future internal forecasts may also be used to help determine any financial targets.

Changes in the fair value of any contingent consideration from additional information obtained during the measurement period (up to a year from date of acquisition) about facts and circumstances that existed at the acquisition date are adjusted retrospectively against goodwill. Changes in the fair value that do not qualify as measurement period adjustments are not recognised until settlement if the contingent consideration was classified as equity at acquisition or are recognised immediately in profit if it was classified as an asset or liability on the balance sheet. Unsettled amounts of consideration are held at fair value within the relevant category of the balance sheet.

Acquisition-related costs are expensed to the income statement in the period they are 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 are measured in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

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.

Goodwill

Goodwill represents the excess of the fair value of the consideration over the fair value of the net assets acquired. Where the fair value of the consideration is less than the fair value of the acquired net assets, the deficit is recognised immediately in profit or loss as a bargain purchase. Goodwill is capitalised and subject to an impairment review at least annually and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in subsequent periods.

For the purpose of impairment testing, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the carrying value may not be recoverable. 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.

In accordance with IAS 21 goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of that foreign operation and as such are translated at the relevant foreign exchange rate at the balance sheet date. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Revenue and income 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 dispatched and title has passed.

Custom service revenue is recognised proportionately when the outcome of each discrete stage of the contract can be estimated reliably and is based on the stage of completion of the contract activity per agreed milestones set out in the contract. 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 income.

Royalty revenue is recognised on an accruals basis based on the contractual terms and the substance of the agreements with the counterparty, provided that the amount can be reliably measured and it is probable that the economic benefit will flow to the Group.

Grant income is recognised in the same period as the related R&D expenses are incurred and is recorded through the corresponding expense line of the income statement.

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

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.

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 the income statement 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

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 Group company and the reporting currency for the consolidated preliminary financial information.

Foreign currency transactions in the individual companies are booked in the functional currency of that entity at the exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are retranslated into their functional currency at the rates ruling at the balance sheet date. Exchange differences are included in the income statement.

On consolidation, the results and cash flows of overseas subsidiaries are translated into Sterling using the average exchange rates during the period, and the balance sheets translated at the rates ruling at the balance sheet date. Exchange differences arising on this translation are classified as equity and recognised in the translation reserve.

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:

• differences arising on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting) which are recognised through other comprehensive income.

• differences arising on foreign currency assets or liabilities designated as a net investment hedge of the Group's overseas operations which are recognised in the 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. The Group has no further obligations once the contributions have been paid.

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.

The benefit of UK research and development is recognised under the UK's Research and Development Expenditure Credit (RDEC) scheme. The benefit is recorded as income included in profit before tax, netted against research and development expenses as the RDEC is of the nature of a government grant.

Where the current tax deduction in respect of share option exercises exceeds the share option accounting charge for the period, the excess is recorded in the tax reserve rather than the income statement.

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 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.

A deferred tax asset is recognised for deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.

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.

The Group's liability for deferred tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date 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 liabilities and 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 is stated at cost less accumulated depreciation and any recognised impairment loss. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the cost 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 the income statement. Residual values of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Assets under the course of construction are not depreciated.

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 useful lives. The principal expected useful lives used for this purpose are as follows:

Patents, technology and know-how assets are only amortised once the development is complete and meaningful revenue is being derived from the identified assets; until this point the asset is deemed to be in progress.

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. Expenditure on research activities is recognised as an expense in the period in which it is incurred. Intangible assets under construction are not amortised.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, a review of the carrying amounts of the Group's and the Company's tangible and intangible assets is performed 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).

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 pre-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.

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 and the Company's balance sheets when the Group or the Company becomes a party to the contractual provisions of the instrument.

Available-for-sale financial assets

Where the Group holds an investment in shares which is classified as an available-for-sale financial asset it is stated at cost less any provision for impairment and estimated costs associated with sale, unless the investment is in relation to shares traded on an active market where a fair valuation for all the shares can be obtained. Such investments are held at fair value, taken as the closing market value of the shares except where the Directors believe there is significant measurement uncertainty in which case the fair value will be adjusted accordingly. Any revaluation gain or loss is recorded through equity.

Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently held at amortised cost, less provision for impairment. 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. Subsequent recoveries of amounts previously written off are credited to revenue. Changes in the carrying amount of receivables 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 and a charitable bond all 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 or the Company 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 not interest bearing and are stated 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 and the Company to manage the exposure to foreign exchange rate risk associated with the variability in foreign currency rates and values in relation to both recognised assets or liabilities and forecast future 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 and the Company designates certain derivatives as cash flow hedges of highly probable forecast foreign currency transactions. The Group and the Company has also designated contingent consideration payable as a hedge of its net investment in foreign operations.

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 highly effective in offsetting changes in cash flows or net investment 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 is deferred in other comprehensive income. 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 it no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in other comprehensive income at that time remains in other comprehensive income 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 other comprehensive income is recognised immediately in profit or loss.

Hedges of net investments in foreign operations

Hedges of net investment in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the translation reserve. 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 accumulated in the translation reserve are reclassified to profit or loss in the same way as exchange differences relating to the foreign operation.

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, LTIP and Deferred Share Award schemes. 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.

The grant date fair value of options issued under the Group's share option schemes is measured by the use of the Monte Carlo simulation.

The grant date fair value of the awards under the Group's LTIP is measured by the use of the Monte Carlo simulation for any market related performance conditions and the Black Scholes Model for EPS and strategic performance conditions.

The grant date 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 the share-based payments reserve.

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

A new scheme has been issued during the year to the Non-Executive Directors of the Group whereby the grant date fair value of options issued is measured by the use of the Black Scholes model.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The Group operates an employee share 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.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's preliminary financial information in the period in which the dividends are approved by the Company's shareholders or, in the case of interim dividends, when paid.

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 amounts of assets, liabilities, revenue and expenses reported in the preliminary financial information. Actual amounts and results may differ from those estimates.

The Directors regularly evaluate the estimates and judgements. Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or prior periods, or in the period of the revision and future periods if the revision affects both current and future periods.

The key accounting judgements and estimates included in the Group's preliminary financial information are discussed below.

a. Critical accounting judgements

Valuation of intangibles

As part of the business combinations the Group has undertaken in the current and previous years, it has acquired the following types of intangible assets: software, contract based, licence fees, customer relationships, patents, trade names, technology and know-how. The Directors are required to make decisions on the fair values of the acquired assets, including identification and valuation of any separately identifiable intangible assets.

The Group obtains a third party valuation for any newly acquired intangible assets to ascertain the initial fair value and identifies a suitable useful life with reference to the third party guidance and the lives attributed to previous similar intangibles. The valuations include assumptions on future cash flows and discount rates based on expected contribution of the acquisition to the Group and are therefore inherently judgemental. The carrying value of the intangible assets may need to be reviewed if the expected benefit to the Group cannot be realised.

In addition to the acquired intangibles, the Group capitalises internal software development costs relating to the enhancement of the Group's core IT systems architecture and developments, where the costs meet the recognition criteria of IAS 38. Judgement is required in applying the capitalisation criteria of IAS 38, differentiating between enhancements and maintenance, and in assessing an expected useful life of the resulting enhancement or development.

During the year £5.5m was capitalised, £4.3m within assets under construction and £1.2m within software assets, in relation to the Group's system and process improvement project. The costs include external consultant costs and incremental staffing costs. In establishing the principles on which the costs are capitalised, the Directors have reviewed the nature of work being performed under the different phases of the project and the nature of the associated deliverables against the capitalisation criteria of IAS 38 and have identified the activities through the life of the project where the related costs should be expensed through the income statement.

Valuation of own manufactured inventory

The costs absorbed into the value of own manufactured inventory require a number of assumptions concerning the allocation of materials, labour and overheads. The assumptions have been made with reference to the requirements of IAS 2. Judgement is used mainly in the application of materials to products produced and in selecting the types of overhead and company personnel that are appropriate to be included in the valuation.

b. Key sources of estimation uncertainty

Goodwill and other intangible asset impairment

Goodwill is deemed to have indefinite life and so is not amortised. The Group tests whether goodwill is impaired on at least an annual basis or more frequently when there are indications of possible impairment. The impairment review requires estimating the value in use of the Group's cash generating unit which is based on expected future cash flows and selection of an appropriate discount rate in order to calculate present value. The assumptions used in the impairment test are set out in note 12. The valuations indicate that the Group has sufficient headroom and that a reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill.

Other intangible assets are amortised. The Group reviews their carrying amount at each balance sheet date or if events occur which call into question the carrying values of the assets.

The carrying value of the software asset may be unsupported where additional development work makes the predecessor development redundant if the full useful life has not already been reached. Due to the commencement of the Group's system and process improvement project, a review of all software assets was conducted during the year and a revision made to the useful lives of any asset expected to be replaced. Additional amortisation of £1.3m has been recognised in the current year (2015: £nil) to accelerate the amortisation of these assets.

The assumptions relating to future cash flows, estimated useful lives and discount rates are based on business forecasts and therefore include an element of management judgement. Future events could cause the assumptions used in these impairment tests to change with a consequent adverse effect on the future results of the Group and the Company.

Provision for slow-moving or defective inventory

The provision for slow-moving inventory is based on management's estimation of the future sales of each of the Group's products over the next five years (or period from the balance sheet date to the expiry date of the product, whichever is the shorter), taking into account actual sales of those products in previous years and applying an assumed growth rate based on historical trends where available.

If actual unit sales growth rates differ from those estimated by management, both the level of provision against existing inventory and the rates of provision applied to inventory in future periods would need to be revised. An increase or decrease of 5% on the projected unit sales growth on each product category would impact the provision required by +0.3% (£0.02m) / -0.4% (£0.03m). Applying no growth to all product categories would give a maximum impact of £0.5m increase in the provision.

Taxation

The Group is subject to income taxes in various jurisdictions. Significant judgement is employed to determine the income tax provision on a global basis. There are numerous transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters differs from amounts initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The Group has recognised significant deferred tax assets during the year in relation to tax losses. Third party experts have been used to assess the value of available losses and recognition of a deferred tax asset has only been made to the level that it is probable that future taxable profit will be available in the relevant jurisdictions to realise them. Future taxable profit is based on management forecasts and if actual profitability differs significantly in the future, this could impact the level of losses that it is possible to utilise.

Contingent consideration and fees

Contingent consideration liabilities are recorded at the fair value of the future expected payment assessed at the date of acquisition. The fair value recognised as part of the acquisition of AxioMx Inc, as detailed in note 26, is based on estimated future cash flows resulting from probability weighted outcomes of defined milestones, discounted using appropriate interest rates. The probabilities are management estimation of the likelihood of success using available scientific and legal knowledge and relevant historic trends. Actual amounts to be paid out in future periods may be different from the estimation and could consequently effect the future results of the Group where actual success of milestone achievement is different from the original estimation. The maximum additional liability if all milestones are met is $3.8m (£2.8m at the balance sheet rate of 1.3368).

5. 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.

Revenue by type is shown below:

1 Includes custom services, IVD/IHC, royalties and licence income.

6. Profit for the year

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

7. Auditor remuneration

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

1 This relates to the interim review.

Details of the Company's policy on the use of the auditor for non-audit services are set out in the Audit and Risk Committee Report. No services were provided pursuant to contingent fee arrangements.

8. Employees and remuneration

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

Their aggregate remuneration comprised:

1 £2,162,000 (2015: £474,000) relates to Group staff costs directly attributable to system development, which include the implementation of a new ERP system, being capitalised as part of internally generated intangible software assets under IAS 38 (see note 13).

9. Finance income and costs

10. Taxation

UK corporation tax is calculated at 20.0% (2015: 20.8%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The standard rate of UK corporation tax reduced from 21% to 20% on 1 April 2015. The Finance Act 2015, which received Royal Assent on 26 March 2015, states that this rate will not change for financial year 2016. Deferred tax has been calculated accordingly in this preliminary financial information.

In the budget of 8 July 2015, the Chancellor of the Exchequer announced tax rate changes, which will have an effect on the Company's future tax position. These additional changes will reduce the standard rate of UK corporation tax from 20% to 19% from 1 April 2017, and 18% from 1 April 2020. These proposed changes were substantively enacted in the Finance Bill 2015 on 26 October 2015.

The above changes to the rate of corporation tax will impact the amount of future cash tax payments to be made by the Company and also the future valuation of any deferred tax liabilities or assets.

The charge for the year can be reconciled to the profit per the income statement as follows:

1 Adjustment includes an additional tax charge in relation to the Company's election to move to the above the line research and development expenditure credit in relation to the years ended 30 June 2015 and 30 June 2014, a tax credit in relation to the usual two year claim and elections made in the resubmission of the UK tax return for the year ended 30 June 2014, and credits related to changes in estimates of the prior year tax charges following receipt of refunds

11. Earnings per share

The calculation of the basic and diluted EPS, shown below the income statement, is based on the following data:

Basic EPS is calculated by dividing the earnings attributable to the owners of the parent by the weighted average number of shares outstanding during the year. Diluted EPS is calculated on the same basis as basic EPS but with a further adjustment for the weighted average shares in issue to reflect the effect of all dilutive potential ordinary shares. The number of dilutive potential ordinary shares is derived from the number of share-based options and awards granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and where it is considered performance conditions will be met.

Adjusted earnings per share

The calculation of adjusted EPS is based on adjusted profit after tax of:

The adjusted EPS information is provided to allow a clear method for year-on-year comparison. The denominators used are the same as those detailed above for both basic and diluted earnings per share.

12. Goodwill

Goodwill is converted at the exchange rate on the date of acquisition and retranslated at the balance sheet date.

Group goodwill acquired in the year relates to the acquisition of AxioMx Inc on 11 November 2015. Note 29 contains further details of the transaction and resulting financial impact on the Group.

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. The Directors consider there to be one CGU as acquisitions are integrated into the Group's operations and product portfolio; see note 5. Any discrete financial information which is available for an individual entity does not reflect the true substance of the performance of that entity or its value in use within the Group. There have been no changes to the Group organisation during the period which would require a reallocation of the goodwill balance.

The Abcam Group CGU is tested for impairment on a Group-wide basis using the future forecast cash flows arising from the Abcam business as a whole.

The Group performs an annual test for goodwill impairment or more frequently if there are any indications that goodwill might be impaired.

The recoverable amount of the CGU is determined from value in use calculations. The key assumptions considered most sensitive for the value in use calculations are those regarding the discount rates and growth rates after five years.

Management has projected cash flows based on financial forecasts over a period of five years. A growth rate of 2.1% has been used in the extrapolation of cash flows beyond the five years based on expected inflationary increases of the economies in which the Group predominantly trades. A pre-tax discount rate of 8.2% has been estimated using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU.

Management has performed sensitivity analysis on the key assumptions mentioned above. Based on the results of this analysis, management is satisfied that the recoverable amount of goodwill exceeds its carrying amount. As such, no impairment of goodwill has been recognised at the balance sheet date.

Due to the headroom which exists between the recoverable amount and the carrying value there is currently no reasonable possible change in any of these key assumptions which would cause the CGU's carrying amount to exceed its recoverable amount.

Company goodwill

The Company goodwill is tested for impairment on an annual basis or more frequently if there are any indications that the goodwill might be impaired. The forecast cash flows arising in the Company have been projected using the same key assumptions as used for the Group testing.

Management has performed sensitivity analysis on the key assumptions and, based on the results of this analysis, management is satisfied that the recoverable amount of goodwill exceeds its carrying amount. As such, no impairment of goodwill has been recognised at the balance sheet date.

13. Intangible assets

Group