Provexis plc
Annual report and accounts 2013
Company number 05102907
Proof1:28.6.13 1 Corporate statement
2 Key highlights
3 Chairman’s statement
4 Chief Executive’s statement
6 Directors’ report – ﬁnancial review
8 Directors’ report – business overview
14 Remuneration report
18 Independent auditor’s report
20 Consolidated statement of comprehensive income
21 Consolidated statement of ﬁnancial position
22 Consolidated statement of cash ﬂows
23 Consolidated statement of changes in equity
24 Notes to the consolidated ﬁnancial statements
53 Parent company balance sheet
54 Notes to the parent company ﬁnancial statements
58 Company information
Contents The Provexis strategy is the development, licensing and marketing of scientiﬁcally-proven functional food,
and sports nutrition technologies, with four areas of focus:
*
To develop SiS
1
into the leader in elite endurance sports nutrition in major global markets;
*
Collaborate closely with Alliance partner DSM Nutritional Products to maximise the commercial
success of Fruitﬂow
1
globally;
*
Underpin the competitiveness of these revenue streams with scientiﬁc excellence and regulatory
capability; and
*
Seek further opportunities in the global functional food and sports nutrition sectors through being
recognised as a partner of choice.
Provexis plc Annual report and accounts 2013 1
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Corporatestatement Key highlights
*
Science in Sport generated revenues of £5.52m in the year, in line with management expectations,
representing like for like revenue growth of 11% compared to the same period last year, with
growth in the second half being 17%;
* Substantial investment made in SiS
1
in order to execute the Board’s growth plan for FY2012/13,
including support for marketing, sales and e-commerce;
* Gross margin for SiS
1
improved by 6% as a result of factory efﬁciencies and cost saving
initiatives;
* Further progress with proprietary Fruitﬂow
1
heart health technology, in conjunction with Alliance
partner DSM, with 17 branded consumer products now on sale in various global markets;
*
Powder format of Fruitﬂow
1
, suitable for dietary supplements, now fully commercialised, with 4 of
the 17 products in market using this format and strong interest from potential customers;
*
Successful efforts to control costs across the Group, along with revenue growth, resulting in a 50%
reduction in underlying operating loss*; and
*
Equity ﬁnancing facility to drawdown £244k in May to support our innovation programme, further
£541k drawdown in September to meet the increasing working capital needs of the growing SiS
1
business.
Key ﬁnancial results
*
Revenues £5.56m (2012: £3.48m).
*
Underlying operating loss* reduced to £1.09m (2012: £2.18m);
* Statutory operating loss £4.66m (2012: £4.33m); statutory loss attributable to owners of the parent
£4.34m (2012: £3.87m). These losses are after charging £3.07m (2012: £1.39m) of non-cash
amortisation and impairment charges, £0.31m (2012: £0.46m) of restructuring costs and a £0.18m
(2012: £0.14m) non-cash share based payment charge.
*
Cash balance at 31 March 2013 £0.62m (2012: £1.45m).
*
Loss per share 0.29p (2012: 0.28p).
*beforeimpairment andamortisationof intangible assets,sharebasedpayments andexceptionalcostsof £3.56m (2012:£2.15m),
as set out on the face of the Consolidated Statement of Comprehensive Income
Provexis plc Annual report and accounts 2013 2
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Keyhighlights The past year has seen substantial progress across the Group as a result of our clear focus on the
strategic objectives of developing revenues from our Fruitﬂow
1
and SiS
1
assets, together with reducing
costs and seeking efﬁciencies.
SiS
1
delivered revenues in line with our expectations and while the summer of 2012 was challenging
due to historically poor weather and adverse trading conditions, we ﬁnished the year very strongly and
have carried this momentum into the new ﬁnancial year. Investment in all our key growth drivers has
seen a good return, with the areas of sales excellence, and e-commerce staff and infrastructure having
received major focus. The new factory has developed well during the year and is now in a position to
effectively meet the growing demand of the SiS
1
business. We continue to develop new SiS
1
products
both in-house and in collaboration with strategic partners, and we believe this to be a key competitive
advantage for us.
The completion of a commercially viable powder version of Fruitﬂow
1
in the ﬁnal quarter of the year was
an important milestone for our collaboration with DSM, given feedback from potential customers in the
global dietary supplement sector. DSM have brought 17 products to market in conjunction with their
international consumer brand customers, and are seeing strong interest in all major global markets for
the powder version of Fruitﬂow
1
.
We have focused strongly on controlling the cost base of the business and the results of this are evident
given the 50% reduction in underlying operating losses for the Group. We will continue to seek further
savings and efﬁciencies in the coming months, and since the year end we have closed our R&D facility
at the University of Aberdeen as part of this drive.
With the investment cycle for Fruitﬂow
1
now complete, and given ongoing cost reduction initiatives, the
Board also propose the demerger of SiS
1
from the Group, in order to optimise the future prospects of
both of our revenue generating assets. The details of the proposed demerger are set out in a separate
circular and announcement. Shareholders will receive one share in the new SiS
1
business for each 100
Provexis shares already owned, allowing investors the ﬂexibility to participate in the growth story for
either or both of our revenue generating assets. The demerger will also see a share placing to capitalise
the new SiS
1
business and to fund its growth strategy.
I would like to thank the executive team and all of our staff and advisors for their high levels of
commitment and professionalism, not only in developing the business, but in putting in place the strategy
to demerge SiS
1
from the Group in order to deliver value for shareholders.
Dawson Buck
Chairman
Provexis plc Annual report and accounts 2013 3
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Chairman’sstatement Strategy
Our strategic priority for the year was to focus on developing revenues from the SiS
1
business, and the
Fruitﬂow
1
technology together with our Alliance partner DSM. In addition, further efforts to reduce costs
across the Group were a parallel strategic activity. We believe we have succeeded in all three areas,
with strong revenue growth from SiS
1
, good progress with Fruitﬂow
1
in bringing a powder version to
market, and wide ranging cost reductions reﬂected in the 50% reduction in underlying operating loss for
the Group.
With these three strategic areas all making good progress, in conjunction with the Board, a next
strategic phase is proposed, which will see the separation of SiS
1
and Fruitﬂow
1
businesses, in order
to optimise the proﬁt potential of each. The details of this are contained within a circular posted today to
shareholders and an announcement.
We used our equity ﬁnancing facility to drawdown £244k in May to support our innovation programme,
with a further £541k drawdown in September to meet the increasing working capital needs of the
growing SiS
1
business.
SiS
1
Revenue in FY12/13 was £5.52m, representing like for like revenue growth of 11% compared to the
same period last year. Growth was constrained to 7% in the ﬁrst half due to historically poor weather
and adverse trading conditions. However trading in the second half was much stronger as a range of
initiatives took effect, resulting in second half revenue growth of 17% and ﬁnal quarter revenue growth of
25%. This momentum has carried into FY13/14.
We have continued to invest in the heartland of independent cycle, triathlon and running shops, through
extra sales staff and capital investment in display stands. This has paid dividends, as we have seen
growth through all our key wholesale accounts. In major grocers and high street accounts, we have both
broadened our range and space in key accounts, together with extending distribution via the addition of
new accounts including Sainsbury’s, Boots, Costco and since the year end, Halfords. International
markets have continued to develop well for us, with strong performances by our distributors in Benelux
and Denmark, and the appointment of a new distributor in France.
Direct selling is a strategic growth driver and as a result we developed and launched a new website and
e-commerce platform in the second half, and recruited an e-commerce team, resulting in good growth in
this channel. Further investment in direct selling is continuing.
Good levels of investment have been made in marketing, through the acquisition of brand ambassadors
Sir Chris Hoy and Helen Jenkins, taking substantial share of voice through press advertising, generating
brand proﬁle through social media channels, and substantially increased PR.
Innovation has been a key growth driver, with Go Hydro tablets, Go Gel
1
plus Fruitﬂow
1
and Go Gel
1
plus Nitrates being notable and successful launches in the year. We have a strong research programme
in place, largely carried out in conjunction with our partner sports teams and athletes, and through
collaboration with leading research institutes. The Directors believe that a promising pipeline is in place
for 2013 and 2014.
The move to a new supply facility has proved effective as gross margin improved by 6%. In addition the
commissioning of the new Go Gel
1
ﬁlling machine has given us capacity to deal with the strong growth
in this product format, and we have recently moved to a 24 hour manufacturing operation to meet
growing demand.
Fruitﬂow
1
The Alliance with DSM has made good progress during the year, with commercial progress with the
existing Fruitﬂow
1
syrup format in a range of global markets, and the launch of a powder format,
suitable for use in dietary supplement formats such as capsules and tablets.
There are now 17 consumer brands containing Fruitﬂow
1
syrup on sale in a range of global markets. As
well as the core blood ﬂow targeted products, DSM customers have also launched brands in the sports
nutrition and travel-related sectors. Our SiS
1
Go Gel
1
plus Fruitﬂow
1
sports recovery product also
launched during the year.
Provexis plc Annual report and accounts 2013 4
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA ChiefExecutive’sstatement The powder format was completed by the DSM team in the ﬁnal quarter of the year, and the product
was ofﬁcially launched at Vitafoods in May 2013. The format has broad potential applications in dietary
supplements, dairy shots, nutrition bars and spreads. Four products containing this format are now in
market, and interest from potential customers is strong, especially in the USA.
We collaborated with DSM to complete a substantial piece of consumer research to more fully
understand consumer attitudes to Fruitﬂow
1
and blood ﬂow, in order to support potential customers in
understanding the key success factors for any new brand launches. The DSM marketing and sales
teams are using the ﬁndings from this research to assist their customers with potential brand positioning.
Whilst revenues for Fruitﬂow
1
remain low in the year, there has been a marked improvement over the
year both in revenues and number of brands in the market. In addition, interest in the technology and
awareness of Fruitﬂow
1
continues to develop. These trends, together with the availability of the powder
format are a source of continued optimism for the prospects of this novel technology.
With the investment cycle completed for Fruitﬂow
1
we continue to focus keenly on costs. Since the year
end, we have to this end, closed our facility at the University of Aberdeen. Residual ongoing costs for
Fruitﬂow
1
are largely related to IP maintenance and management time for the Alliance with DSM.
Outlook
The outlook for SiS
1
is positive as we continue to invest in marketing, sales and direct selling to drive
revenue growth, underpinned by an increasingly effective supply chain. With our current sales
momentum, the continued resilience in the sports nutrition category, the Board believes we are placed
for strong growth for the coming year and beyond.
While the investment cycle is completed for Fruitﬂow
1
we continue to work closely with DSM to explore
all avenues for growing revenues for our novel technology. The number of international brands
containing Fruitﬂow
1
continues to steadily increase and the availability of the powder format enhances
further the prospects for the technology. While the economic climate is still affecting the attitude of global
brand owners towards large-scale innovation, the general outlook is positive.
The proposed demerger of SiS
1
, subject to shareholder approval, will further optimise the outlook for
both the Fruitﬂow
1
and SiS
1
businesses.
Stephen Moon
Chief Executive
Provexis plc Annual report and accounts 2013 5
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA ChiefExecutive’sstatementcontinued
Fruitﬂow
1
(continued) Underlying operating loss
Underlying operating loss has reduced by 50% to £1,094,937 (2012: £2,180,362), reﬂecting the
signiﬁcant restructuring conducted between 2011 and 2013, and continued progress with SiS
1
and
Fruitﬂow
1
.
The Group has chosen to report underlying operating loss as the Directors believe that the operating
loss before amortisation and impairment of acquired goodwill and other intangible assets, share based
payments and exceptional items measure provides additional useful information for shareholders on
underlying trends and performance. A reconciliation of underlying operating loss to statutory operating
loss is presented on the face of the consolidated statement of comprehensive income. This measure is
used for internal performance analysis.
The Group’s cost base and its resources have been and will continue to be tightly managed within
budgets approved and monitored by the Board.
Research and development costs
Research and development costs for the year ended 31 March 2013 were £501,098 (2012: £818,186)
including £25,545 capitalised under IAS 38 (2012: £56,729).
The suspension of work on the Crohn’s disease trial does not constitute discontinued operations as
deﬁned by ‘IFRS 5 Non-current assets Held for Sale and Discontinued Operations’ as the operations
have neither been permanently abandoned nor are being actively marketed for sale at this stage, and
therefore no discontinued operations disclosures are necessary.
Impairment of goodwill – amortisation and impairment charges
The consolidated balance sheet of the Group includes goodwill relating to two cash generating units
(CGUs), Provexis and SiS.
Under IAS 36, management must test this goodwill for impairment annually by comparing the carrying
value of assets in each CGU with either the fair value less costs to sell or value in use.
Signiﬁcant judgement is exercised in determining the underlying assumptions used in the impairment
review; the assumptions include the discount rate, operating margin and growth rate, as further detailed
in note 12.
On 28 June 2013 the Company announced its intention to separate SiS (Science in Sport) Limited from
the Provexis Group by way of a demerger, as further detailed in note 26, with a consequent signiﬁcant
reduction envisaged in the annual central running costs of the Provexis Group. For the purposes of IAS
36 the proposed demerger amounts to a future restructuring to which an entity is not yet committed at
the year end, hence the future estimated cash ﬂows of the Provexis CGU used in the calculations do
not include the signiﬁcant annual central cost savings which are expected to result from the demerger.
Using the discount rate and growth rates shown in note 12, and without taking into account the
signiﬁcant annual central cost savings which are expected to result from the demerger, the carrying
amount of the Provexis CGU exceeds its recoverable amount hence a total non cash impairment loss of
£2,781,499 has been recognised in the year, as further detailed in notes 11 and 12. The impairment loss
is made up of the existing £2,661,879 carrying value of the Provexis CGU and a related £119,620 of
intangible assets in respect of previously capitalised intangible development costs.
The Directors have concluded that no other indication of impairment to goodwill exists because the
results of SiS
1
have been in line with budget since acquisition.
A further £269,512 non cash amortisation charge has been recognised during the year in respect of the
intangible assets acquired by the Company on its acquisition of SiS in June 2011.
Restructuring costs
Restructuring costs of £314,370 (2012: £464,513) were incurred during the year primarily in respect of
staff reductions, as the Group has continued to seek to reduce its cost base. The restructuring charge
this year includes all the costs of closing the Group’s facility at the University of Aberdeen.
Provexis plc Annual report and accounts 2013 6
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–ﬁnancialreview Taxation
A current tax credit of £190,304 (2012: £150,000), primarily in respect of research and development
expenditure incurred, and a deferred tax credit of £65,682 (2012: £178,538) primarily in respect of the
amortisation of acquired intangible assets have been recognised in the ﬁnancial statements. A £162,369
tax credit claim for the year ended 31 March 2011 was paid to the Group during the year, and further
group tax credit claims amounting to £194,927 for the year ended 31 March 2012 were paid to the
Group in May 2013, after the year end.
Losses and dividends
The loss attributable to equity holders of the parent for the year ended 31 March 2013 was £4,338,600
(2012: £3,873,215) and the basic and diluted loss per share was 0.29p (2012: 0.28p). The directors are
unable to recommend the payment of a dividend (2012: £Nil).
Capital structure and funding
On 23 April 2012 the Company announced that application had been made for the admission to AIM of
4,000,000 ordinary shares of 0.1p each in the Company, pursuant to the exercise of options by a former
employee. The Company received net proceeds of £36,000 in respect of this transaction.
On 17 May 2012 the Company announced that it had raised a net £244,336 by drawing down on the
Company’s equity ﬁnancing facility (the ‘‘EFF’’) which was arranged by Darwin Strategic Limited
(‘‘Darwin’’), allotting 13,197,880 new ordinary shares of 0.1p each to Darwin.
On 28 August 2012 the Company announced that it had raised a net £541,111 by drawing down on the
Company’s EFF, allotting 31,620,884 new ordinary shares of 0.1p each to Darwin.
Further details of the EFF agreement and the drawdowns made using the EFF are available to download
from the announcements section of the Company’s website www.provexis.com.
In September 2012 an asset ﬁnance agreement was secured with HSBC Equipment Finance for a
number of assets acquired in the last year by SiS
1
for the Company’s new Nelson factory. HSBC
remitted £258,544 to the Group in September 2012.
A £200,000 bank overdraft facility for SiS
1
was additionally agreed with HSBC in September 2012,
providing the Group with greater headroom.
Going concern
The Group made a loss for the year attributable to owners of the parent of £4,338,600 (2012:
£3,873,215) and expects to make a further loss during the year ending 31 March 2014. The total cash
outﬂow from operating activities in the year was £1,433,348 (2012: £2,165,267). At 31 March 2013 the
Group had cash balances of £616,612 (2012: £1,447,405).
The directors have prepared projected cash ﬂow information for a period including twelve months from
the date of approval of these ﬁnancial statements on the basis that the demerger of SiS (Science in
Sport) Limited and concurrent placing, as further detailed in note 26, will proceed.
The demerger is conditional inter alia upon the approval of the Company’s shareholders at the General
Meeting proposed for 15 July 2013 and the conﬁrmation of the Company’s reduction of capital by the
Court. It is the directors’ current belief and intention that the demerger will proceed as intended and
accordingly the going concern basis has been used in preparing the ﬁnancial statements.
Should the demerger not proceed the Company would be forced to seek further ﬁnance, most likely
through the Group’s existing equity drawdown facility with Darwin or through an equity fundraising with
the Company’s shareholders, albeit that such funds realised may be insufﬁcient to meet the ongoing
working capital requirements of the Group.
Were the demerger not to proceed it may not be appropriate for the directors to prepare the accounts
on a going concern basis and adjustments may need to be made accordingly. The directors have
concluded that these circumstances represent a material uncertainty that casts signiﬁcant doubt upon the
Group’s ability to continue as a going concern and that therefore, if the demerger is not approved, the
Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
Nevertheless after making enquiries, the directors have a reasonable expectation that the demerger will
proceed as expected. For these reasons, they continue to adopt the going concern basis of accounting
in preparing the annual ﬁnancial statements.
Provexis plc Annual report and accounts 2013 7
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–ﬁnancialreviewcontinued Principal activities
Provexis plc is a business that develops, licenses and markets scientiﬁcally-proven functional food and
sports nutrition technologies.
Provexis plc has three wholly owned subsidiaries, SiS (Science in Sport) Limited (‘‘SiS’’), Provexis
Nutrition Limited (‘‘PNL’’) and Provexis Natural Products Limited (‘‘PNP’’) which are registered in England
and Wales. Provexis plc also owns 75% of Provexis (IBD) Limited (‘‘IBD’’) which is also registered in
England and Wales.
Group strategy
The Provexis strategy is the development, licensing and marketing of scientiﬁcally-proven functional food,
and sports nutrition technologies, with four areas of focus:
* To develop SiS
1
into the leader in elite endurance sports nutrition in major global markets;
* Collaborate closely with Alliance partner DSM Nutritional Products to maximise the commercial
success of Fruitﬂow
1
globally;
* Underpin the competitiveness of these revenue streams with scientiﬁc excellence and regulatory
capability; and
* Seek further opportunities in the global functional food and sports nutrition sectors through being
recognised as a partner of choice.
Review of the performance of the business and future developments
The Chairman’s Statement on page 3, the Chief Executive’s Statement on pages 4 and 5 and the
Financial Review on pages 6 and 7 report on the Group’s performance during the year ended 31 March
2013, its position at that date and its likely future development.
Internal control and risk management
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’
investment and the Group’s assets, as well as reviewing its effectiveness. The system of internal control
is designed to manage rather than eliminate the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material loss and misstatement.
The Audit Committee continues to monitor and review the effectiveness of the system of internal control
and report to the Board when appropriate with recommendations. There have been no signiﬁcant
changes to the system of internal control throughout the year.
The key control procedures operating within the Group include, but are not limited to:
1. a comprehensive system of ﬁnancial budgeting, forecasting and then reporting and reviewing actual
monthly results for the current year against these expectations;
2. a system of operational and ﬁnancial Key Performance Indicators (‘‘KPIs’’), which are reviewed on
a weekly and monthly basis;
3. procedures for appraisal, review and authorisation of capital expenditure;
4. properly authorised treasury procedures and banking arrangements;
5. regular review of materials and services supply agreements; and
6. regular review of tax, insurance and health and safety matters.
The principal ﬁnancial KPIs monitored by the Board relate to underlying operating loss and cash and
cash equivalents.
Provexis plc Annual report and accounts 2013 8
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverview The table below shows the Group’s underlying operating loss for the two years ended 31 March 2013:
Year
ended
31 March
2013
Year
ended
31 March
2012
£ £
Underlying operating loss 1,094,937 2,180,362
The £1,085,425 reduction in underlying operating loss in 2013 was primarily attributable to the £285,904
R&D cost savings made during the ﬁnancial year, a reduction in central administrative costs of £330,075
and a £300,013 increase in the underlying operating proﬁt of SiS. The trading results are further detailed
in the ﬁnancial review on pages 6 and 7.
The table below shows the Group’s cash position at 31 March 2013 and 31 March 2012:
31 March
2013
31 March
2012
£ £
Cash and cash equivalents 616,612 1,447,405
The monitoring of cash gives due consideration to anticipated future spend required to prioritise
development opportunities and to plan the resources required to achieve the goals of the business. The
£830,793 reduction in cash and cash equivalents during the ﬁnancial year is primarily the result of the
operating cash outﬂows arising during the year, as further detailed in the consolidated statement of cash
ﬂows on page 22.
At this stage in the Group’s development, the Board does not consider it appropriate to establish an
internal audit function.
Principal risks and uncertainties
In the course of its normal business the Group is exposed to a range of risks and uncertainties which
could impact on the results of the Group. The Board considers that risk-management is an integral part
of good business process and, on a bi-annual basis, reviews the industry, operational and ﬁnancial risks
facing the Group and considers the adequacy of the controls & mitigants to manage the risks.
The Directors have identiﬁed the following principal risks and uncertainties that could have the most
signiﬁcant impact on the Group’s long-term value generation.
Intellectual property
The Group’s success will depend in part on its ability to obtain and maintain rigorous patent protection
for its technologies both in the UK and internationally. The Group cannot give deﬁnitive assurance that
pending or future patent applications will be granted or that patents granted will not be challenged,
invalidated or held unenforceable.
The Group cannot assure that its intellectual property rights are sufﬁciently broad to prevent third parties
from producing competing functional food and sports nutrition technologies similar in nature to its own.
The Group also relies on protection of trade secrets, know-how and conﬁdential and proprietary
information. To mitigate this, the Group enters into non-disclosure agreements with employees,
consultants and prospective commercial partners but cannot assure that such agreements will provide
complete safeguards against unauthorised disclosure of conﬁdential information.
The Group’s commercial success will also depend in part on avoiding infringement of other third parties’
patents or proprietary rights and the breach of any licences in connection with the pursuit of its
technologies. Management is of the opinion that it does not infringe third parties’ patents or other rights
and is not aware of any such infringements but cannot assure that it will not be found in the future to
infringe such rights.
Provexis plc Annual report and accounts 2013 9
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverviewcontinued
Internal control and risk management (continued) Food quality and safety
A major incident resulting from a food quality or health and safety failure could pose a risk to consumers
and therefore have reputational and ﬁnancial implications for the Group.
The Group’s stringent approach to food quality and safety is controlled via quality assurance procedures
which are based on a risk management approach. Internal systems are reviewed continuously and
potential for improvement is monitored.
The Group’s SiS
1
manufacturing facility is subject to regular food safety and quality control audits,
including those carried out by, and/or for, major customers. The Group’s products are analysed and
tested regularly for banned substances by an experienced, independent surveillance company. Where
appropriate, additional investment is made to optimise ingredient screening efﬁciency and effectiveness.
The Group maintains product liability insurance cover to mitigate the potential impact of such an event.
The Group believes that the quality of its raw materials is critical to the quality of its product. The
availability and resultant price levels of ingredients meeting the Group’s high standards of quality may
adversely affect the margins available to the Group, subject to the ability to pass through corresponding
price increases to customers.
Movement in the commodity prices of raw materials and, in the case of imported raw materials and
other goods, the value of Sterling against other currencies may have a corresponding impact on ﬁnished
product cost. Failure to manage the Group’s exposure to price increase may adversely affect the
Group’s ﬁnancial performance.
Customers and consumers
The Group operates in a competitive market sector and its ability to compete effectively requires an on-
going commitment to marketing, product development, innovation, product quality and ability to offer
value for money.
A signiﬁcant proportion of the Group’s sales is generated from a small number of customers and hence
there is a risk from loss of a key customer of a signiﬁcant piece of business. Signiﬁcant resources are
devoted to forging strong relationships with customers.
The Group relies on potential license partners to meet certain commercial and development milestones
and their failure to achieve this, or other delays or cancellation of projects due to internal or market
factors affecting potential license partners could affect the execution of the Group’s business plan, with a
material adverse effect on the business.
People
The Group recognises that its employees are critical to the successful delivery of service to customers.
The failure to retain people of high quality would have an adverse effect on Group performance. The
Group has high expectations of all staff and in return strives to provide an environment that is both
challenging and rewarding.
Funding and other risks
The Group may require additional funding. To the extent that the current cash resources of the Group
are insufﬁcient to cover the Group’s liabilities in the longer term, in particular should the demerger and
placing not go ahead, it may be necessary to seek additional funds through future equity or debt
ﬁnancings and there is no certainty that such funds would be available. Any such further ﬁnancings, if
available at all, may be on terms that are not favourable to the Group. Further, if adequate capital
cannot be obtained, the Group’s operating results and ﬁnancial condition could be adversely affected.
Provexis plc Annual report and accounts 2013 10
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverviewcontinued
Principal risks and uncertainties (continued) Policy on the payment of creditors
It is the policy of the Group to pay creditors and suppliers in accordance with their normal terms of
business. Creditor days outstanding for the Group at 31 March 2013 amounted to 62 days compared to
51 days at 31 March 2012.
Board of Directors
The Board of Directors has overall responsibility for the Group.
The Board comprises a Non-executive Chairman, two additional Non-executive Directors, all of whom are
independent, and two further Executive Directors. The Board continues to be satisﬁed that it has an
appropriate mix of independence and experience in its Non-executive Directors.
The Directors of the Company during the year and up to the date that the ﬁnancial statements were
approved are shown below.
Executive Directors
S N Moon
I Ford
Non-executive Directors
C D Buck
J M Clarke (appointed 1 April 2012)
K Rietveld
A qualifying third-party indemnity provision as deﬁned in Section 234 of the Companies Act 2006 is in
force for the beneﬁt of each of the Directors in respect of liabilities incurred as a result of their ofﬁce, to
the extent permitted by law. In respect of those liabilities for which Directors may not be indemniﬁed, the
Company maintained a Directors’ and ofﬁcers’ liability insurance policy throughout the ﬁnancial year.
Audit Committee
The Audit Committee comprises two Non-executive Directors and is chaired by Dawson Buck as
Chairman. It meets as required and speciﬁcally to review the Interim Report and Annual Report and to
consider the suitability and monitor the effectiveness of the internal control processes. There were two
Audit Committee meetings during the year. The Audit Committee reviews the ﬁndings of the external
auditors and reviews accounting policies and material accounting judgements.
The independence of the auditors is considered by the Audit Committee. The Audit Committee (with no
Executive Director present) meets at least once per calendar year with the auditors to discuss their
objectivity and independence, the Annual Report, any audit issues arising, internal control processes and
any other appropriate matters. As well as providing audit related services, the auditors provide taxation
advice, corporate ﬁnance services and share scheme advice and undertake work in relation to the
interim report. The fees in respect of the non-audit services provided are £10,500 for the year ended
31 March 2013 (2012: £63,500). The Audit Committee have considered the non- audit fees agreed with
Chantrey Vellacott DFK in respect of the demerger and are satisﬁed that the objectivity and
independence of the auditors is safeguarded.
The current terms of reference of the Audit Committee are set out in the governance pages on the
Group’s website www.provexis.com.
Going concern
The Directors have a reasonable expectation that the Group and the Company will continue in
operational existence for the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the Group’s ﬁnancial statements.
This expectation is contingent upon the successful completion of the demerger and placing as further
detailed in note 1 and note 26 to the consolidated ﬁnancial statements.
Provexis plc Annual report and accounts 2013 11
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverviewcontinued Employees
The Executive Directors keep staff informed of the progress and development of the Group regularly
through formal and informal meetings and employee feedback is encouraged. The Company has a policy
of offering share options to all eligible employees, subject to availability under the option plan rules and
with due consideration to the level of dilution to shareholders.
The Group does not discriminate between employees and prospective employees on grounds of age,
race, religion or gender. Every effort is made to provide the same opportunities to disabled persons as
to others.
The Board recognises its obligation towards its employees to provide a safe and healthy working
environment. The Group complies with health and safety legislation including conducting regular
inspections and risk assessments.
Environmental, social and community matters
As a result of the size and nature of the Group’s operations, the impact of the Group’s operations on the
local community and the environment is not considered to be signiﬁcant. Recycling of ofﬁce supplies is
undertaken where possible.
Relationship with shareholders
The Directors seek to build a mutual understanding of objectives between the Company and its
shareholders. The Group reports formally to shareholders in its interim and annual reports setting out
details of its activities. In addition, the Group keeps shareholders informed of events and progress
through the issue of regulatory news in accordance with the AIM rules of the London Stock Exchange.
The Chief Executive and Finance Director seek to meet with signiﬁcant shareholders following interim
and ﬁnal results. The Group also maintains investor relations pages and other information regarding the
business, its products and activities on its website www.provexis.com.
Where possible the Annual Report is sent to shareholders at least 20 working days before the Annual
General Meeting. Directors are required to attend Annual General Meetings of the Company unless
unable to do so for personal reasons or due to pressing commercial commitments. Shareholders are
given the opportunity to vote on each separate issue. The Company counts all proxy votes and will
indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands.
Post balance sheet events
On 28 June 2013 the Group announced its intention to separate SiS (Science in Sport) Limited from the
Provexis Group. It is proposed that this separation will be effected by way of a demerger of SiS
(Science in Sport) Limited to a new company called Science in Sport plc. Science in Sport plc will seek
admission of its entire issued and to be issued ordinary share capital to trading on AIM on or around
9 August 2013.
In order to provide ongoing working capital for each of the demerged businesses and to pay the costs
associated with the demerger, Science in Sport plc has announced that it has undertaken a conditional
placing to raise £2.25 million (before commission and expenses).
The demerger and placing are conditional inter alia upon the approval of Provexis plc shareholders at a
General Meeting proposed for 15 July 2013, and the subsequent conﬁrmation of the Company’s
reduction of capital by the Court.
Adequacy of information supplied to auditors
Each Director has taken all reasonable steps to make himself aware of any information needed by the
Company’s auditors for the purpose of their audit and to establish that the auditors are aware of that
information. The Directors are not aware of any relevant audit information of which the auditors are
unaware.
Following a tender process, Chantrey Vellacott DFK LLP were appointed as the Company’s external
auditor commencing with the 2013 ﬁnancial year.
Chantrey Vellacott DFK LLP have expressed their willingness to continue in ofﬁce and a resolution to re-
appoint them will be proposed at the next annual general meeting.
Provexis plc Annual report and accounts 2013 12
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverviewcontinued Directors’ responsibilities
The directors are responsible for preparing the directors’ report and the ﬁnancial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year. Under that
law the directors have elected to prepare the group ﬁnancial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and the company ﬁnancial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the directors must not approve the
ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of affairs of
the group and company and of the proﬁt or loss of the group for that period. The directors are also
required to prepare ﬁnancial statements in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market.
In preparing these ﬁnancial statements, the directors are required to:
*
select suitable accounting policies and then apply them consistently;
*
make judgements and accounting estimates that are reasonable and prudent;
*
state whether the group ﬁnancial statements have been prepared in accordance with IFRSs as
adopted by the European Union, subject to any material departures disclosed and explained in the
ﬁnancial statements;
* state whether the company ﬁnancial statements have been prepared in accordance with applicable
UK Accounting Standards, subject to any material departures disclosed and explained in the
ﬁnancial statements;
* prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufﬁcient to show and
explain the company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial
position of the company and enable them to ensure that the ﬁnancial statements comply with the
requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Website publication
The directors are responsible for ensuring the annual report and the ﬁnancial statements are made
available on a website. Financial statements are published on the company’s website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements,
which may vary from legislation in other jurisdictions. The maintenance and integrity of the company’s
website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing
integrity of the ﬁnancial statements contained therein.
By order of the Board
Ian Ford
Secretary
28 June 2013
Provexis plc Annual report and accounts 2013 13
c108597pu010Proof2:28.6.13_09:27B/LRevision:0OperatorPutA Directors’report–businessoverviewcontinued Remuneration Committee: composition and terms of reference
The Group’s Remuneration Committee during the year ended 31 March 2013 comprised three
independent Non-executive Directors and was chaired by Dawson Buck.
The purpose of the Remuneration Committee is to ensure that the Executive Directors are fairly
rewarded for their individual contribution to the overall performance of the Company. The Committee
considers and recommends to the Board the remuneration of the Executive Directors and is kept
informed of the remuneration packages of senior staff and invited to comment on these.
Policy on Executive Directors’ remuneration
Executive remuneration packages are designed to attract and retain executives of the necessary skill
and calibre to run the Company successfully but avoiding paying more than is necessary. Direct
benchmarking of remuneration is not possible given the specialised nature and size of the Company.
The Remuneration Committee recommends to the Board remuneration packages by reference to
individual performance and uses the knowledge and experience of the Non-executive Directors and
published surveys relating to AIM Directors, and market changes generally. The Remuneration
Committee has responsibility for recommending any long term incentive schemes.
The full Board determines whether or not Executive Directors are permitted to serve in roles with other
companies. Such permission is only granted where a role is on a strictly limited basis, where there are
no conﬂicts of interest or competing activities and providing there is not an adverse impact on the
commitments required to the Group. Earnings from such roles are not disclosed nor paid to the Group.
There are four main elements of the remuneration package for Executive Directors and senior staff:
(i) Basic salaries and beneﬁts in kind
Basic salaries are recommended to the Board by the Remuneration Committee, taking into account the
performance of the individual and the rates for similar positions in comparable companies. Beneﬁts in
kind comprising private medical insurance are available to all senior staff and Executive Directors.
(ii) Share option scheme
The Company operates a share option scheme which was established in June 2005 (’’the Provexis 2005
share option scheme’’) to motivate the Executive Directors and employees through equity participation in
the Company. Options granted pursuant to the Provexis 2005 share option scheme may take the form of
either unapproved share options or tax favoured EMI options. Exercise of options under the scheme is
subject to speciﬁed exercise periods and compliance with the AIM rules of the London Stock Exchange.
The scheme is overseen by the Remuneration Committee which recommends to the Board all grants of
share options based on the Committee’s assessment of personal performance and specifying the terms
under which eligible individuals may be invited to participate.
In June 2005 the Company undertook a reverse takeover of Provexis Natural Products Limited (‘‘PNP’’,
formerly Provexis Limited) through a share for share exchange. Prior to the takeover the Company and
PNP had granted EMI options and unapproved options. Options granted by the Company prior to the
takeover remain subject to the same terms as contained in the individual share option contracts under
which they were originally granted. The PNP EMI options and unapproved options were rolled over into
options over the Company’s ordinary shares, and these replacement options remain subject to the same
terms as contained in the individual PNP share option contracts under which they were originally
granted.
The UK Corporate Governance Code refers to the requirement for the performance-related elements of
remuneration to form a signiﬁcant proportion of the total remuneration package of Executive Directors
and should be designed to align their interests with those of shareholders. In the development phase of
the Group the Remuneration Committee currently considers that the best alignment of these interests is
through continued use of incentives for performance through the award of share options or other share-
based arrangements.
Provexis plc Annual report and accounts 2013 14
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Remuneration report (iii) Bonus scheme
The Company has an established discretionary non-pensionable bonus scheme for Executive Directors,
which is subject to the achievement of agreed goals and targets that are designed to incentivise
Directors to perform at the highest levels, and align Directors’ interests with those of the shareholders.
For the Executive Directors the performance-related annual bonus potential is up to 40% of basic salary.
The Remuneration Committee approved no bonuses in 2013 or 2012.
(iv) Pension contributions
The Group pays a deﬁned contribution to the pension scheme of Executive Directors and employees.
The individual pension schemes are private and their assets are held separately from those of the
Group.
Salaries and beneﬁts were reviewed in April 2012 to cover the year from 1 April 2012 to 31 March 2013.
Future reviews will continue to be undertaken on an annual basis each April to enable the Group’s
performance over the preceding ﬁnancial year and the strategy for the forthcoming year to be
considered.
Service contracts
The Chief Executive is employed under a service contract requiring twelve months’ notice by either
party, and the Finance Director is employed under a service contract requiring three months’ notice.
Non-executive Directors receive payments under appointment letters which are terminable by six months’
notice from either party.
Policy on Non-executive Directors’ remuneration
Dawson Buck and John Clarke each receive a fee for their services as a director, which is approved by
the Board, mindful of the time commitment and responsibilities of their roles and of current market rates
for comparable organisations and appointments. Non-executive Directors are reimbursed for travelling
and other minor expenses incurred.
Gains made on exercise of directors’ share options
No directors’ share options were exercised during the year (2012: Nil).
Details of directors’ remuneration
The emoluments of the individual Directors for the year were as follows:
Year ended 31 March 2013 Year ended
31 March
2012
Salary and
directors’
fees
Beneﬁts in
kind
Pension Total Total
££££ £
Executive Directors
S N Moon 200,364 1,109 10,018 211,491 197,553
S N Morrison (resigned 30 November 2011) —— —— 128,006
I Ford 129,024 1,993 6,451 137,468 127,619
P Walker (appointed 24 September 2011 – resigned
29 November 2011)
—— —— 116,437
Non-executive Directors
C D Buck 35,000 — — 35,000 27,500
J M Clarke (appointed 1 April 2012) 29,000 — — 29,000 —
N C Bain (resigned 30 November 2011) —— —— 11,667
K Rietveld —— —— —
393,388 3,102 16,469 412,959 608,782
The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Group
business.
Provexis plc Annual report and accounts 2013 15
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Remuneration report continued
Policy on Executive Directors’ remuneration (continued) Share-based payment expense
The share-based payment expenses of the individual Directors recognised for the year were as follows:
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Executive Directors
S N Moon 88,087 69,504
S N Morrison (resigned 30 November 2011) — —
I Ford 41,453 32,708
P Walker (appointed 24 September 2011 – resigned 29 November 2011) — —
Non-executive Directors
C D Buck — —
N C Bain (resigned 30 November 2011) — —
K Rietveld — —
129,540 102,212
Directors’ interests in shares Ordinary shares of
0.1 pence each
Ordinary shares of
0.1 pence each
Beneﬁcial interests
31 March 2013 1 April 2012
S N Moon 2,060,666 2,060,666
I Ford 2,201,832 2,201,832
C D Buck 12,906,433 12,906,433
17,168,931 17,168,931
Other than as shown in the table and as further disclosed above in respect of Deferred Shares in note
20 and disclosed in respect of share options in note 21, no Director had any interest in the shares of
the Company or its subsidiary companies at 31 March 2013.
Provexis plc Annual report and accounts 2013 16
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Remuneration report continued Directors’ interests in share options
The Board uses share options to align Directors and employees interests with those of shareholders in
order to provide incentives and reward them based on improvements in Company performance.
The share options held by the Directors and not exercised at 31 March 2013 are summarised below.
31 March
2013
31 March
2012
S N Moon 38,117,620 38,117,620
I Ford 18,000,000 18,000,000
56,117,620 56,117,620
The unapproved share options at 31 March 2013 of the Directors who served during the year are set
out below:
Grant date Number
awarded
Exercise
price/share
Earliest
exercise date
Expiry date
S N Moon August 2008 7,324,520 0.900p April 2011 August 2018
S N Moon June 2011 17,000,000 2.800p April 2014 June 2021
I Ford June 2011 6,350,010 2.800p April 2014 June 2021
30,674,530
The EMI share options at 31 March 2013 of the Directors who served during the year are set out below:
Grant date Number
awarded
Exercise
price/share
Earliest
exercise date
Expiry date
S N Moon August 2008 1,117,620 1.000p August 2008 August 2018
S N Moon August 2008 2,675,480 0.900p April 2011 August 2018
S N Moon August 2008 10,000,000 0.900p October 2009 August 2018
I Ford August 2008 5,000,000 0.900p April 2011 August 2018
I Ford August 2008 5,000,000 0.900p October 2009 August 2018
I Ford June 2011 1,649,990 2.800p April 2014 June 2021
25,443,090
All options were granted with an exercise price at or above market value on the date of grant.
The Company carried out a share re-organisation on 28 August 2008, which is further detailed in note
20 to the consolidated ﬁnancial statements.
Share options which had been granted prior to 28 August 2008 over existing ordinary shares with a
nominal value of 1p each in the capital of the Company became options over new ordinary shares with
a nominal value of 0.1p each in the capital of the Company. The options remain subject to the same
terms as contained in the individual option contracts under which they were originally granted.
Share options issued after 28 August 2008 are options over new ordinary shares with a nominal value of
0.1p each in the capital of the Company.
On 28 June 2013, following a recommendation from the Company’s Remuneration Committee at a
meeting on 1 May 2012, the Company will grant a further 35,000,000 options to Directors.
Dawson Buck
Chairman of the Remuneration Committee
Provexis plc Annual report and accounts 2013 17
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Remuneration report continued TO THE MEMBERS OF PROVEXIS PLC
We have audited the ﬁnancial statements of Provexis plc for the year ended 31 March 2013 which
comprise the consolidated statement of comprehensive income, the consolidated statement of ﬁnancial
position, the consolidated statement of cash ﬂows, the consolidated statement of changes in equity, the
parent company balance sheet and related notes. The ﬁnancial reporting framework that has been
applied in the preparation of the group ﬁnancial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The ﬁnancial reporting framework that
has been applied in the preparation of the parent company ﬁnancial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in an auditors’ report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the
preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view. Our
responsibility is to audit and express an opinion on the ﬁnancial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the ﬁnancial statements
A description of the scope of an audit of ﬁnancial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on ﬁnancial statements
In our opinion:
* the ﬁnancial statements give a true and fair view of the state of the group’s and the parent
company’s affairs as at 31 March 2013 and of the group’s loss for the year then ended;
*
the group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
* the parent company’s ﬁnancial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
*
the ﬁnancial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Emphasis of matter-going concern
In forming our opinion on the ﬁnancial statements, which is not modiﬁed, we have considered the
adequacy of the disclosure made in note 1 to the ﬁnancial statements concerning the group’s ability to
continue as a going concern. The group incurred a net loss of £4,391,706 and net cash outﬂows from
operating activities of £1,433,348 during the year ended 31 March 2013 and the directors expect the
group to incur further losses in the year ended 31 March 2014. The directors have projected cash ﬂows
on the basis that the demerger of SiS (Science in Sport) Limited and concurrent placing will proceed as
planned. The demerger is conditional inter alia upon the approval of the Company’s shareholders at the
General Meeting proposed for 15 July 2013 and the conﬁrmation of the Company’s reduction of capital
by the Court.
These conditions along with the other matters explained in note 1 to the ﬁnancial statements, indicate
the existence of a material uncertainty that casts signiﬁcant doubt about the group’s ability to continue
as a going concern. The ﬁnancial statements do not include the adjustments that would result if the
group was unable to continue as a going concern.
Provexis plc Annual report and accounts 2013 18
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Independent auditor’s report to the members of Provexis
plc Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report for the ﬁnancial year for which the ﬁnancial
statements are prepared is consistent with the ﬁnancial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires
us to report to you if, in our opinion:
*
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
*
the parent company ﬁnancial statements are not in agreement with the accounting records and
returns; or
*
certain disclosures of directors’ remuneration speciﬁed by law are not made; or
*
we have not received all the information and explanations we require for our audit.
Neil Tustian (Senior Statutory Auditor)
For and on behalf of Chantrey Vellacott DFK LLP,
Chartered accountant and statutory auditor
Reading
28 June 2013
Provexis plc Annual report and accounts 2013 19
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Independent auditor’s report to the members of Provexis
plc continued Year ended
31 March
2013
Year ended
31 March
2012
Notes £ £
Revenue 1,3 5,559,591 3,477,862
Cost of goods (2,418,177) (1,720,241)
Gross proﬁt 3,141,414 1,757,621
Research and development costs 4 (475,553) (761,457)
Administrative costs (7,322,685) (5,326,301)
Underlying operating loss (1,094,937) (2,180,362)
Amortisation and impairment charges 11 (3,068,234) (1,390,638)
Costs of acquisition 10 — (153,163)
Restructuring costs 4 (314,370) (464,513)
Share based payment charges 21 (179,283) (141,461)
Loss from operations 4 (4,656,824) (4,330,137)
Finance income 7 12,407 46,853
Finance costs 7 (3,275) (742)
Loss before taxation (4,647,692) (4,284,026)
Taxation 8 255,986 328,538
Loss and total comprehensive expense for the period (4,391,706) (3,955,488)
Attributable to:
Owners of the parent 22 (4,338,600) (3,873,215)
Non-controlling interest 22 (53,106) (82,273)
Loss and total comprehensive expense for the period 22 (4,391,706) (3,955,488)
Loss per share to owners of the parent
Basic and diluted – pence 9 0.29 0.28
All amounts relate to continuing operations.
Provexis plc Annual report and accounts 2013 20
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Consolidated statement of comprehensive income Company number 05102907 As at
31 March
2013
As at
31 March
2012
Notes £ £
Assets
Non-current assets
Intangible assets 11 6,553,502 9,369,603
Plant and equipment 13 634,920 598,430
Deferred tax 19 110,348 128,948
Total non-current assets 7,298,770 10,096,981
Current assets
Inventories 14 913,387 635,771
Trade and other receivables 15 1,253,305 934,773
Corporation tax asset 8 288,801 300,000
Cash and cash equivalents 16 616,612 1,447,405
Total current assets 3,072,105 3,317,949
Total assets 10,370,875 13,414,930
Liabilities
Current liabilities
Trade and other payables 17 (1,787,569) (1,541,839)
Borrowings 18 (64,774) —
Current tax liabilities — (39,133)
Total current liabilities (1,852,343) (1,580,972)
Net current assets 1,219,762 1,736,977
Non-current liabilities
Borrowings 18 (161,871) —
Deferred tax 19 (450,789) (535,072)
Total non-current liabilities (612,660) (535,072)
Total liabilities (2,465,003) (2,116,044)
Total net assets 7,905,872 11,298,886
Capital and reserves attributable to owners of the
parent company
Share capital 20 5,134,170 5,085,352
Share premium reserve 22 20,769,423 19,998,832
Warrant reserve 22 60,000 60,000
Merger reserve 22 6,599,174 6,599,174
Retained earnings 22 (24,385,057) (20,225,740)
8,177,710 11,517,618
Non-controlling interest 22 (271,838) (218,732)
Total equity 7,905,872 11,298,886
These consolidated ﬁnancial statements were approved and authorised for issue by the Board on
28 June 2013. The notes on pages 24 to 52 form part of these consolidated ﬁnancial statements.
Stephen Moon Ian Ford
Director Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2013 21
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Consolidated statement of ﬁnancial position Year ended
31 March
2013
Year ended
31 March
2012
Notes £ £
Cash ﬂows from operating activities
Loss after tax (4,391,706) (3,955,488)
Adjustments for:
Amortisation and impairment 11 3,068,234 1,390,638
Impairment of ﬁxed assets 37,876 —
Depreciation 13 187,712 89,360
Loss on disposal of intangible assets — 9,872
Loss / (proﬁt) on sale of ﬁxed assets 1,556 (3,631)
Net ﬁnance income (9,132) (46,111)
Taxation (255,986) (328,538)
Share-based payment charge 179,283 141,461
Operating cash outﬂow before changes in working capital (1,182,163) (2,702,437)
Changes in inventories (338,719) 42,239
Changes in trade and other receivables (320,590) 81,419
Changes in trade and other payables 245,755 320,426
Total cash outﬂow from operations (1,595,717) (2,258,353)
Tax paid — (28,134)
Tax credits received 162,369 121,220
Total cash outﬂow from operating activities (1,433,348) (2,165,267)
Cash ﬂow from investing activities
Purchase of property, plant and equipment (263,634) (458,984)
Proceeds from sale of property, plant and equipment — 4,750
Purchase of intangible assets (191,030) (62,356)
Interest received 12,427 49,762
Acquisition of subsidiary net of cash acquired 10 — (6,786,036)
Net cash outﬂow from investing activities (442,237) (7,252,864)
Cash ﬂow from ﬁnancing activities
Proceeds from issue of share capital 785,447 3,524,694
Expenses paid on share issues — (236,919)
Proceeds from borrowings 258,544 —
Repayment of borrowings (31,924) —
Proceeds from exercise of share options 36,000 27,000
Interest paid (3,275) (744)
Net cash ﬂow from ﬁnancing activities 1,044,792 3,314,031
Net decrease in cash and cash equivalents (830,793) (6,104,100)
Opening cash and cash equivalents 16 1,447,405 7,551,505
Closing cash and cash equivalents 16 616,612 1,447,405
Provexis plc Annual report and accounts 2013 22
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Consolidated statement of cash ﬂows Share
capital
Share
premium
Warrant
reserve
Merger
reserve
Retained
earnings
Total equity
attributable
to owners of
the parent
Non-
controlling
interests
Total
equity
££ ££ ££ ££
At 31 March 2011 4,812,036 16,909,650 115,980 6,273,909 (16,493,986) 11,617,589 (136,459) 11,481,130
Share-based charges — — — — 141,461 141,461 — 141,461
Issue of shares – acquisition of SiS
(Science in Sport) 24 June 2011
35,336 — — 325,265 — 360,601 — 360,601
Issue of shares – placing
24 June 2011
166,667 2,333,333 — — — 2,500,000 — 2,500,000
Issue costs – placing 24 June 2011 — (199,380) — — — (199,380) — (199,380)
Issue of shares – open offer
27 July 2011
68,313 956,381 — — — 1,024,694 — 1,024,694
Issue costs – open offer 27 July 2011 — (37,539) — — — (37,539) — (37,539)
Issue of shares – share options
exercised 13 December 2011
3,000 24,000 — — — 27,000 — 27,000
Cancellation of warrants – equity
ﬁnancing facility 8 November 2011
— 12,387 (115,980) — — (103,593) — (103,593)
Issue of warrants – equity ﬁnancing
facility 8 November 2011
— — 60,000 — — 60,000 — 60,000
Total comprehensive expense for
the year
— — — — (3,873,215) (3,873,215) (82,273) (3,955,488)
At 31 March 2012 5,085,352 19,998,832 60,000 6,599,174 (20,225,740) 11,517,618 (218,732) 11,298,886
Share-based charges — — — — 179,283 179,283 — 179,283
Issue of shares – share options
exercised 27 April 2012
4,000 32,000 — — — 36,000 — 36,000
Issue of shares – equity ﬁnancing
facility 23 May 2012
13,198 230,504 — — — 243,702 — 243,702
Issue of shares – equity ﬁnancing
facility 3 September 2012
31,620 508,087 — — — 539,707 — 539,707
Total comprehensive expense for
the year
— — — — (4,338,600) (4,338,600) (53,106) (4,391,706)
At 31 March 2013 5,134,170 20,769,423 60,000 6,599,174 (24,385,057) 8,177,710 (271,838) 7,905,872
Provexis plc Annual report and accounts 2013 23
c108597pu020Proof2:28.6.13_09:28B/LRevision:0OperatorPutA Consolidated statement of changes in equity 1. Accounting policies
General information
Provexis plc is a public limited company incorporated and domiciled in the United Kingdom (registration
number 05102907). The address of the registered ofﬁce is Kings Road House, 2 Kings Road, Windsor,
Berkshire SL4 2AG, UK.
The main activities of the Group are those of developing, licensing and marketing scientiﬁcally-proven
functional food and sports nutrition technologies for the global functional food and sports nutrition
sectors.
Basis of preparation
The Group ﬁnancial statements have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the
International Accounting Standards Board (IASB) as adopted by the European Union (‘‘adopted IFRS’’)
and those parts of the Companies Act 2006 that are applicable to ﬁnancial statements prepared in
accordance with IFRS.
The Company has elected to prepare its parent company ﬁnancial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (‘‘UK GAAP’’), and these are set out on pages 53 to
57.
The accounting policies set out below have been applied to all periods presented in these Group
ﬁnancial statements and are in accordance with IFRS, as adopted by the European Union, and
International Financial Reporting Interpretations Committee (‘‘IFRIC’’) interpretations that were applicable
for the year ended 31 March 2013.
There have been no new or amended standards adopted by the Group since the prior ﬁnancial year.
The following new standards, amendments to standards and interpretations have been issued but are
not effective for the year ended 31 March 2013. The new standards, amendments to standards and
interpretations will be relevant to the Group but have not been adopted early as the Directors do not
expect these standards and interpretations to have a material effect on the consolidated ﬁnancial
statements:
*
IAS 1 (Amended) ‘Financial statement presentation’ is effective from periods commencing on or
after 1 July 2012.
* IFRS 7 (Amended) ‘Financial instruments: Disclosures’ and IAS 32 (Amended) Financial
instruments: Presentation’ are effective from 1 January 2013.
* IFRS 9 ‘Financial Instruments’ is effective from periods commencing on or after 1 January 2015.
*
IFRS 10 ‘Consolidated ﬁnancial statements’ is effective from periods commencing on or after
1 January 2014.
*
IFRS 12 ‘Disclosures of interests in other entities’ is effective from periods commencing on or after
1 January 2014.
*
IFRS 13 ‘Fair value measurement’ is effective from periods commencing on or after 1 January
2013.
*
IAS 27 (Amended) ‘Separate ﬁnancial statements’ is effective from periods commencing on or after
1 January 2014.
*
Improvements to IFRS 2009-2011 cycle, effective for periods beginning on or after 1 January 2013
There are a number of standards, interpretations and amendments to published accounts not listed
above which the Directors consider not to be relevant to the Group.
Phase 1 of IFRS 9 ‘Financial instruments’ was issued in November 2009 and has subsequently been
updated and amended. The standard is effective for annual periods commencing on or after 1 January
2015 and has not yet been endorsed for use by the EU. The Group is currently assessing the impact of
this standard on its results, ﬁnancial position and cash ﬂows.
Provexis plc Annual report and accounts 2013 24
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatements Going concern
The Group’s business activities together with the factors likely to affect its future development are set
out in the Business Overview on pages 8 to 13. The ﬁnancial position of the Group, its cash ﬂows and
liquidity position are set out in the Financial Review on pages 6 and 7. In addition note 2 to the ﬁnancial
statements includes the Group’s objectives, policies and processes for managing its capital; its ﬁnancial
risk management objectives; details of its ﬁnancial instruments and its exposure to credit and liquidity
risk.
The Group made a loss for the year attributable to owners of the parent of £4,338,600 (2012:
£3,873,215) and expects to make a further loss during the year ending 31 March 2014. The total cash
outﬂow from operating activities in the year was £1,433,348 (2012: £2,165,267). At 31 March 2013 the
Group had cash balances of £616,612 (2012: £1,447,405).
The directors have prepared projected cash ﬂow information for a period including twelve months from
the date of approval of these ﬁnancial statements on the basis that the demerger of SiS (Science in
Sport) Limited and concurrent placing, as further detailed in note 26, will proceed.
The demerger is conditional inter alia upon the approval of the Company’s shareholders at the General
Meeting proposed for 15 July 2013 and the conﬁrmation of the Company’s reduction of capital by the
Court. It is the directors’ current belief and intention that the demerger will proceed as intended and
accordingly the going concern basis has been used in preparing the ﬁnancial statements.
Should the demerger not proceed the Company would be forced to seek further ﬁnance, most likely
through the Group’s existing equity drawdown facility with Darwin or through an equity fundraising with
the Company’s shareholders, albeit that such funds realised may be insufﬁcient to meet the ongoing
working capital requirements of the Group.
Were the demerger not to proceed it may not be appropriate for the directors to prepare the accounts
on a going concern basis and adjustments may need to be made accordingly. The directors have
concluded that these circumstances represent a material uncertainty that casts signiﬁcant doubt upon the
Group’s ability to continue as a going concern and that therefore, if the demerger is not approved, the
Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
Nevertheless after making enquiries, the directors have a reasonable expectation that the demerger will
proceed as expected. For these reasons, they continue to adopt the going concern basis of accounting
in preparing the annual ﬁnancial statements.
Basis of consolidation
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to
govern the ﬁnancial and operating policies generally accompanying a shareholding of more than one half
of the voting rights. 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.
The consolidated ﬁnancial information presents the results of the Company and its subsidiaries, Provexis
Nutrition Limited, Provexis Natural Products Limited, Provexis (IBD) Limited and SiS (Science in Sport)
Limited as if they formed a single entity (‘‘the Group’’). All subsidiaries share the same reporting date,
31 March, as Provexis plc. All intra group balances are eliminated in preparing the ﬁnancial statements.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange. Identiﬁable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of
acquisition over the fair value of the Group’s share of the identiﬁable net assets acquired is recorded as
goodwill. The direct costs of acquisition are recognised immediately as an expense.
Non-controlling interest
Proﬁt or loss and each component of other comprehensive income are attributed to the owners of the
parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the
parent and the non-controlling interests even if this results in the non-controlling interests having a deﬁcit
balance.
Provexis plc Annual report and accounts 2013 25
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued) Revenue
Revenue comprises the fair value received or receivable for exclusivity arrangements, collaboration
agreements, royalties and sales net of sales rebates and excluding VAT and trade discounts.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) Exclusivity arrangements and collaboration agreements are recognised as revenue in the
accounting period in which the related services, or required activities, are performed or speciﬁed
conditions are fulﬁlled in accordance with the terms of completion of the speciﬁc transaction.
(ii) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals
basis in accordance with the substance of the relevant agreement and based on the receipt from
the licensee of the relevant information to enable calculation of the royalty due.
(iii) Sales are recorded net of value added tax when the signiﬁcant risks and rewards of ownership
have been transferred to the buyer in accordance with customer terms. This is normally when
goods are dispatched to export customers and when the goods are delivered for UK customers.
Sales rebates and discount reserves are established based on management’s best estimate of the
amounts necessary to meet claims by the Group’s customers in respect of these rebates and
discounts. The provision is made at the time of sale and released, if unutilised, after assessment
that the likelihood of such a claim being made has become remote.
Segment reporting
The Group determines and presents operating segments based on the information that internally is
provided to the Executive Committee of the Board of Directors, which is the Group’s ‘chief operating
decision maker’ (‘‘CODM’’).
An operating segment is a component of the Group that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions with
any of the Group’s other components. An operating segment’s operating results are reviewed regularly
by the CODM to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete ﬁnancial information is available.
Segment results that are reported to the Group Board include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment, and intangible assets.
Use of non-GAAP proﬁt measure – underlying operating proﬁt
The Directors believe that the operating loss before amortisation and impairment of acquired intangibles,
share based payments and exceptional items measure provides additional useful information for
shareholders on underlying trends and performance. This measure is used for internal performance
analysis. Underlying operating loss is not deﬁned by IFRS and therefore may not be directly comparable
with other companies’ adjusted proﬁt measures. It is not intended to be a substitute for, or superior to
IFRS measurements of proﬁt.
Exceptional items are those material items which, by virtue of their size or incidence, are presented
separately in the Statement of Comprehensive Income to give a full understanding of the Group’s
underlying ﬁnancial performance. Transactions which may give rise to exceptional items include the
restructuring of business activities and acquisitions. A reconciliation of underlying operating proﬁt to
statutory operating proﬁt is set out on the face of the Statement of Comprehensive Income.
Leased assets
Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards
incidental to ownership of the leased item are classiﬁed as operating leases. Operating lease rentals are
charged to the statement of comprehensive income on a straight line basis over the lease term. The
Group does not hold any assets under ﬁnance leases.
Provexis plc Annual report and accounts 2013 26
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued) Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the identiﬁable net assets acquired. Goodwill on acquisition of subsidiaries is included in ‘intangible
assets’. Separately recognised goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses.
An impairment loss is recognised within administrative expenses in the consolidated statement of
comprehensive income for the amount by which the asset’s carrying amount exceeds its recoverable
amount. For the purposes of assessing impairment, assets are grouped into cash generating units
(‘CGU’) being the lowest levels for which there are separately identiﬁable cash ﬂows. The recoverable
amount of a CGU is the higher of a CGU’s fair value less costs to sell and value in use.
Impairment losses on goodwill are not reversed.
Research and development
Certain Group products are in the research phase and others are in the development phase. Expenditure
incurred on the development of internally generated products is capitalised if it can be demonstrated
that:
*
It is technically feasible to develop the product for it to be sold;
* Adequate resources are available to complete the development;
*
There is an intention to complete and sell the product;
* The Group is able to sell the product;
*
Sale of the product will generate future economic beneﬁts; and
* Expenditure on the project can be measured reliably.
The value of the capitalised development cost is assessed for impairment annually. The value is written
down immediately if impairment has occurred. Development costs are not being amortised as income
has not yet been realised from the underlying technology. Development expenditure, not satisfying the
above criteria, and expenditure on the research phase of internal projects is recognised in the statement
of comprehensive income as incurred.
Patents and trademarks
The costs incurred in establishing patents and trademarks are either expensed or capitalised in
accordance with the corresponding treatment of the development expenditure for the product to which
they relate.
Website development costs
Website development costs are capitalised to the extent that it is capable of generating direct revenues
from enabling orders to be placed. Costs associated with the planning stage are recognised in the
Income Statement.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a
straight-line basis over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity
or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by
using appropriate valuation techniques.
In-process research and development programmes acquired in such combinations are recognised as an
asset even if subsequent expenditure is written off because the criteria speciﬁed in the policy for
research and development costs above are not met.
Provexis plc Annual report and accounts 2013 27
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued) The signiﬁcant intangibles recognised by the Group, their useful economic lives and the methods used to
determine the cost of intangibles acquired in a business combination are as follows:
Intangible asset Useful economic life Valuation method
Trademarks 9.5 Relief From Royalty Rate Method
Patents / recipes / formulations 4.5 to 9.5 Relief From Royalty Rate Method
Covenants not to compete 3.0 Comparative Business Valuation
Customer relationships 9.5 Multi-Period Excess Earnings Method
Website development costs 5.0 Historic Cost
Non-current assets held for sale or distribution and disposal groups
Non-current assets and disposal groups are classiﬁed as held for sale when, at the year end:
– they are available for immediate sale;
– management is committed to a plan to sell;
– it is unlikely that signiﬁcant changes to the plan will be made or that the plan will be withdrawn;
– an active programme to locate a buyer has been initiated;
– the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and
– a sale is expected to complete within 12 months from the date of classiﬁcation.
Non-current assets and disposal groups classiﬁed as held for sale are measured at the lower of:
– their carrying amount immediately prior to being classiﬁed as held for sale in accordance with the
Group’s accounting policy; and
– fair value less costs to sell.
Following their classiﬁcation as held for sale, non-current assets (including those in a disposal group) are
not depreciated.
The results of operations disposed during the year are included in the consolidated statement of
comprehensive income up to the date of disposal.
A discontinued operation is a component of the Group’s business that represents a separate major line
of business or geographical area of operations or is a subsidiary acquired exclusively with a view to
resale, that has been disposed of, has been abandoned or that meets the criteria to be classiﬁed as
held for sale.
Discontinued operations are presented in the consolidated statement of comprehensive income as a
single line which comprises the post-tax proﬁt or loss of the discontinued operation along with the post-
tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the
assets or disposal groups constituting discontinued operations.
Plant and equipment
Plant and machinery, ﬁxtures, ﬁttings and computer equipment and laboratory equipment are stated at
cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure
that is directly attributable to the acquisition of the items. Depreciation is charged to the Statement of
Comprehensive Income on all plant and equipment at rates calculated to write off the cost or valuation,
less estimated residual value, of each asset on a straight line basis over their estimated useful lives,
which is:
* between 3 and 8 years for motor vehicles, plant and machinery, ﬁxtures, ﬁttings and computer
equipment; and
*
5 years for laboratory equipment.
Leasehold improvements are depreciated on a straight line basis over the unexpired portion of the lease.
The assets’ residual values and useful lives are determined by the Directors and reviewed and adjusted
if appropriate at each balance sheet date in accordance with the Group policy for impairment of assets.
Provexis plc Annual report and accounts 2013 28
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued)
Externally acquired intangible assets (continued) The gain or loss arising on the disposal of an asset is determined as the difference between the
disposal proceeds and the carrying amount of the asset and is recognised in the income statement.
Impairment of assets
Assets that have a ﬁnite useful life but that are not yet in use and are therefore not subject to
amortisation or depreciation are tested annually for impairment. Assets that are subject to amortisation
are reviewed for impairment annually and when events or circumstances suggest that the carrying
amount may not be recoverable, an impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
Goodwill is allocated to cash-generating units (‘CGU’) for the purpose of impairment testing to the extent
that it is possible to allocate goodwill to a CGU on a non-arbitrary basis. A CGU is identiﬁed at the
lowest aggregation of assets that generate largely independent cash inﬂows, and that which is looked at
by management for monitoring and managing the business.
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 immediately
in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the
asset in prior periods. A reversal of an impairment loss is recognised immediately in the statement of
comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase. Impairment losses on goodwill are
not reversed.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated as follows:
Raw materials – cost of purchase on ﬁrst in, ﬁrst out basis.
Work in progress and ﬁnished goods – cost of raw materials and labour, together with attributable
overheads based on the normal level of activity.
Net realisable value is based on estimated selling price less further costs to completion and disposal. A
charge is made to the income statement for slow moving inventories. The charge is reviewed at each
balance sheet date.
Financial instruments
Financial assets
The Group’s ﬁnancial assets are comprised of ‘trade and other receivables’ and ‘cash and cash
equivalents’. They are recognised initially at their fair value and subsequently at amortised cost. The
Group will assess at each balance sheet date whether there is objective evidence that the ﬁnancial asset
is impaired. If an asset is judged to be impaired the carrying amount of the asset will be adjusted to its
impaired valuation.
Financial liabilities
The Group’s ﬁnancial liabilities comprise ‘trade and other payables’ and ‘borrowings’. These are
recognised initially at fair value and subsequently at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Provexis plc Annual report and accounts 2013 29
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued)
Plant and equipment (continued) Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government grants are recognised in the
statement of comprehensive income in the same period to which the costs that they are intended to
compensate are expensed.
Taxation
Current tax is provided at amounts expected to be recovered or to be paid using the tax rates and tax
laws that have been enacted or substantively enacted at the balance sheet date. When research and
development tax credits are claimed they are recognised on an accruals basis and are included as a
taxation credit.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on
the balance sheet differs from its tax base, except for differences arising on:
* The initial recognition of goodwill
*
The initial recognition of an asset or liability in a transaction which is not a business combination
and at the time of the transaction affects neither accounting or taxable proﬁt; and
*
Investments in subsidiaries where the Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable
proﬁts will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the deferred tax
liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset
current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the
same tax authority on either:
* The same taxable Group Company; or
*
Different Group entities which intend to settle current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously, on each future period in which signiﬁcant
amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the statement of
comprehensive income.
Employee beneﬁts
(i) Deﬁned contribution plans
The Group provides retirement beneﬁts to all employees and Executive Directors. The assets of these
schemes are held separately from those of the Group in independently administered funds. Contributions
made by the Group are charged to the statement of comprehensive income in the period in which they
become payable.
(ii) Accrued holiday pay
Provision has been made at the balance sheet date for holidays accrued but not taken at the salary of
the relevant employee at that date.
Provexis plc Annual report and accounts 2013 30
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued) (iii) Share-based payment transactions
The Group operates an equity-settled, share-based compensation plan. Vesting conditions are service
conditions and performance conditions only. Where share options are awarded to employees and others
providing similar services, the fair value of the options at the date of grant is charged to the statement of
comprehensive income over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period is based on the number of options
that eventually vest. Market vesting conditions are factored into the fair value of the options when
granted. As long as all other vesting conditions are satisﬁed, a charge is made irrespective of whether
the market vesting conditions are satisﬁed. The cumulative charge is not adjusted for failure to achieve a
market vesting condition. If market related terms and conditions of options are modiﬁed before they vest,
the change in the fair value of the options, measured immediately before and after the modiﬁcation, is
also charged to the statement of comprehensive income over the remaining vesting period. If non-market
related terms and conditions of options are modiﬁed before they vest, the number of instruments
expected to vest at each balance sheet date, and therefore the cumulative charge, is therefore amended
accordingly. Where equity instruments are granted to persons other than employees and others providing
similar services, the statement of comprehensive income is charged with the fair value of goods and
services received.
The proceeds received when options are exercised, net of any directly attributable transaction costs, are
credited to share capital (nominal value) and the remaining balance to share premium.
National insurance on share options
All employee option holders sign statements that they will be liable for any employers national insurance
arising on the exercise of share options.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
Warrants
The Group has issued warrants to Darwin Strategic Limited as part of the Equity Financing Facility.
These warrants have been measured at fair value at the date of grant using an appropriate options
pricing model.
This fair value has been held on the balance sheet within prepayments and in the warrants reserve
within equity. The prepayment will be released against share premium as the equity ﬁnancing facility is
utilised. The warrants reserve will be released to share premium when the warrants are exercised. If the
warrants lapse or are cancelled then the reserve is transferred to retained earnings.
Critical accounting estimates and judgements
The preparation of ﬁnancial statements in conformity with IFRSs requires the use of certain critical
accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the ﬁnancial statements and the reported amounts of revenues and expenses during the
reporting period.
Estimates and judgements are continually made and are based on historic experience and other factors,
including expectations of future events that are believed to be reasonable in the circumstances.
As the use of estimates is inherent in ﬁnancial reporting, actual results could differ from these estimates.
The Directors believe the following to be the key areas of estimation and judgement:
(i) Research and development
Under IAS 38 Intangible Assets, development expenditure which meets the recognition criteria of the
standard must be capitalised and amortised over the useful economic lives of intangible assets from
product launch. The Directors consider that the criteria to capitalise development expenditure were met
in 2007 for one of the Group’s products and have continued to be met since.
Provexis plc Annual report and accounts 2013 31
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued)
Employee beneﬁts (continued) (ii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. The charge for share-based
payments is determined based on the fair value of awards at the date of grant partly by use of the
Black-Scholes pricing model which require judgements to be made regarding expected volatility, dividend
yield, risk free rates of return and expected option lives. The inputs used in these pricing models to
calculate the fair values are set out in note 21. An element of the share-based payment charge also
relies on certain assumptions over the future performance of the share price which may not be met or
may be exceeded by the time the relevant awards vest.
(iii) Goodwill and impairment
The recoverable amount of goodwill is determined based on value in use calculations of the cash-
generating units to which it relates. Further detail on key assumptions, including growth rates, discount
rates and the time period of these value in use calculations is given in note 12.
The Group prepares and approves formal ﬁve year management plans for its operations, which are used
in the value in use calculations. In certain cases the ﬁfth year of the management plan is not indicative
of the long- term future performance as operations may not have reached maturity. In this case
management extends the plan data for a longer period.
(iv) Fair value of identiﬁable net assets acquired
Upon acquisition of a business, its identiﬁable assets and liabilities are assessed to determine their fair
value. The values attributed to assets and liabilities as part of this process are, where appropriate, based
on market values identiﬁed for equivalent assets, together with management’s experience and
assessments including comparison to the carrying value of assets of a similar condition and age in the
existing business.
(v) Valuation of inventories
Inventories are valued at the lower of cost and net realisable value. Cost comprises direct materials,
labour and, where appropriate, overheads that have been incurred in bringing the inventory to its present
location and condition. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
(vi) Useful economic lives of intangible and tangible assets
In relation to the Group’s ﬁnite life intangible assets and property, plant and equipment, useful economic
lives and residual values of assets have been established using historical experience and an assessment
of the nature of the assets involved. Assets are assessed on an ongoing basis to determine whether
circumstances exist that could lead to potential impairment of the carrying value of such assets.
2. Financial risk management
2.1 Financial risk factors
The Group’s activities inevitably expose it to a variety of ﬁnancial risks: market risk (including currency
risk, cash ﬂow interest rate risk and fair value interest rate risk), credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex ﬁnancial instruments. The Group’s
primary treasury objective is to minimise exposure to potential capital losses whilst at the same time
securing favourable market rates of interest on Group cash deposits using money market deposits with
banks. Cash balances used to settle the liabilities from operating activities are also maintained in current
accounts which earn interest at variable rates.
(a) Market risk
Foreign exchange risk
The Group primarily enters into contracts which are to be settled in UK pounds. However, some
contracts involve other major world currencies including the US Dollar and the Euro. Where large
contracts of more than £50,000 total value are to be settled in foreign currencies consideration is given
to converting the appropriate amounts to or from UK pounds at the outset of the contract to minimise
the risk of adverse currency ﬂuctuations.
The Group incurred minimal expenditure in foreign currencies during the year, and the prior year, and
consequently there is no material exposure to foreign currency rate risk.
Provexis plc Annual report and accounts 2013 32
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
1. Accounting policies (continued)
Critical accounting estimates and judgements (continued) Cash ﬂow and fair value interest rate risk
The Group’s interest rate risk arises from medium term and short term money market deposits. Deposits
which earn variable rates of interest expose the Group to cash ﬂow interest rate risk. Deposits at ﬁxed
rates expose the Group to fair value interest rate risk.
The Group analyses its interest rate exposure on a dynamic basis throughout the year.
(b) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and ﬁnancial institutions as
well as credit exposure in relation to outstanding receivables. Group policy is to place deposits with
institutions with investment grade A2 or better (Moody’s credit rating) and deposits are made in sterling
only. The Group does not expect any losses from non-performance by these institutions. Management
believes that the carrying value of outstanding receivables and deposits with banks represents the
Group’s maximum exposure to credit risk.
(c) Liquidity risk
Liquidity risk arises from the Group’s management of working capital, it is the risk that the Group will
encounter difﬁculty in meeting its ﬁnancial obligations as they fall due. Prudent liquidity risk management
implies maintaining sufﬁcient cash and cash equivalents and management monitors rolling forecasts of
the Group’s liquidity on the basis of expected cash ﬂow.
The Group had trade and other payables at the statement of ﬁnancial position date of £1,787,569 (2012:
£1,541,839) as disclosed in note 17.
2.2 Capital risk management
The Group considers its capital to comprise its ordinary share capital, share premium, warrant reserve,
merger reserve and accumulated retained earnings as disclosed in the consolidated statement of
ﬁnancial position on page 21.
The Group remains funded primarily by equity capital. The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going concern in order to provide returns for equity
holders of the Company and beneﬁts for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
3. Segmental reporting
The Group’s reporting segments are determined based on the Group’s internal reporting to the Chief
Operating Decision Maker (CODM). The CODM has been determined to be the Executive Committee of
the Board of Directors as it is primarily responsible for the allocation of resources to segments and the
assessment of performance of the segments.
The CODM uses underlying operating proﬁt/(loss), as reviewed at monthly Executive Committee
meetings, as the key measure of the segments’ results as it reﬂects the segments’ underlying trading
performance for the ﬁnancial period under evaluation.
Underlying operating proﬁt/(loss) is a consistent measure within the Group which measures the
performance of each segment before goodwill and acquired intangible asset amortisation and impairment,
share based payment charges, restructuring charges and acquisition costs arising from acquisitions.
Segment assets include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis.
Provexis plc Annual report and accounts 2013 33
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
2. Financial risk management (continued)
2.1 Financial risk factors (continued) The segment results, the reconciliation of the segment measures to the respective statutory items
included in the Group Statement of Comprehensive Income and the segment assets and liabilities are as
follows:
Year ended 31 March 2013 2012
Provexis SiS Group Provexis SiS Group
£ £££ ££
Revenue 37,351 5,522,240 5,559,591 5,779 3,472,083 3,477,862
Underlying operating (loss)/
proﬁt (1,169,268) 74,331 (1,094,937) (1,954,680) (225,682) (2,180,362)
Intangible asset amortisation
and impairment charges (2,781,499) (286,735) (3,068,234) (1,179,352) (211,286) (1,390,638)
Costs of SiS acquisition
expensed ——— (153,163) — (153,163)
Restructuring costs (135,787) (178,583) (314,370) (205,746) (258,767) (464,513)
Share-based payment
charges (179,283) — (179,283) (141,461) — (141,461)
Loss from operations (4,265,837) (390,987) (4,656,824) (3,634,402) (695,735) (4,330,137)
Net ﬁnance income/(expense) 12,407 (3,275) 9,132 46,853 (742) 46,111
Loss before taxation (4,253,430) (394,262) (4,647,692) (3,587,549) (696,477) (4,284,026)
Additions to non-current
assets 28,582 487,185 515,767 85,175 7,249,144 7,334,319
Reportable segment assets 880,077 9,490,798 10,370,875 4,503,878 8,911,052 13,414,930
Reportable segment
liabilities (333,672) (2,131,331) (2,465,003) (355,755) (1,760,289) (2,116,044)
External revenue by location of customers 2013 2012
££
UK 4,804,440 3,085,147
Europe 679,830 338,634
Rest of the World 75,321 54,081
Revenue 5,559,591 3,477,862
All operations and assets are based in the UK. There were no intersegment sales or transfers for the
period.
Revenues from three customers individually exceed 10% of group revenue, respectively £651,768 (2012:
£406,884), £648,988 (2012: £286,690) and £588,760 (2012: £331,770). These major customers purchase
goods from the SiS segment.
The segments identiﬁed include the following:
*
Provexis, being the development and marketing of health based nutritional products; and
*
SiS, being the development and marketing of sports based nutritional products.
Provexis plc Annual report and accounts 2013 34
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
3. Segmental reporting (continued) 4. Loss from operations
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Loss from operations is stated after charging:
Depreciation of plant and equipment 187,712 89,360
Amortisation and impairment of intangible assets 3,068,234 1,390,638
Research and development costs 475,553 761,457
Foreign exchange (gains) / losses (6,245) 2,414
Costs of acquisition — 153,163
Restructuring costs 314,370 464,513
Loss on disposal of intangible assets — 9,872
Loss / (proﬁt) on disposal of property, plant and equipment 1,556 (3,631)
Changes in inventories of ﬁnished goods and work in progress (338,719) 42,239
Grant income (3,000) (3,000)
Operating lease costs – land and buildings 157,374 222,441
Equity-settled share based payment expense 179,283 141,461
Deﬁned contribution pension expense 24,903 42,434
Restructuring costs of £135,787 were incurred as part of the closure of the group’s R&D facility at the
University of Aberdeen, along with other reductions in group administrative headcount. The restructuring
costs in 2012 of £205,746 were incurred as part of the suspension of work on the Crohn’s disease trial
and the cardiovascular inﬂammation project, and the closure of the Liverpool facility.
Restructuring and rebranding costs of a further £178,583 (2012: £258,767) have been incurred as part of
the reorganisation and rebranding of the SiS
1
business.
The total fees of the Group’s auditor, for services provided are analysed below:
Chantrey Vellacott DFK BDO LLP
Year ended
31 March
2013
Year ended
31 March
2012
Year ended
31 March
2013
Year ended
31 March
2012
£ ££ £
Audit services
Parent company 15,000 — — 28,000
Subsidiaries 24,500 — — 46,500
Tax services – compliance
Parent company 2,500 — — 4,000
Subsidiaries 6,000 — — 12,500
Other services
iXBRL services 2,000 — — —
Parent company – share option scheme advice — — — 15,000
Review of interim statement — — 5,000 7,000
Corporate ﬁnance – due diligence — — — 25,000
Total fees 50,000 — 5,000 138,000
The Group has engaged Chantrey Vellacott DFK LLP to assist the Group with the proposed demerger of
SiS (Science in Sport) Limited from the Provexis Group to a new company called Science in Sport plc.
Science in Sport plc has engaged Chantrey Vellacott DFK to assist it with the proposed admission of its
entire issued and to be issued ordinary share capital to trading on AIM on or around 9 August 2013, as
further detailed in note 26.
Further information on the proposed demerger and admission of Science in Sport plc to AIM can be
found in the Circular, and Admission to trading on AIM document, which were issued on 28 June 2013.
Copies of the Circular and the Admission to trading on AIM document can be downloaded from Provexis
plc’s website www.provexis.com.
Provexis plc Annual report and accounts 2013 35
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 5. Wages and salaries
The average monthly number of persons (including all Directors) employed by the Group during the year
was as follows:
Year ended
31 March
2013
Year ended
31 March
2012
Sales staff 8 5
Manufacturing staff 33 8
Administrative staff 6 12
Research and development staff 4 7
Directors 4 4
55 36
Their aggregate emoluments were:
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Wages and salaries 1,983,247 1,736,465
Social security costs 197,930 191,772
Other pension and insurance beneﬁts costs 27,361 69,205
Total cash settled emoluments 2,208,538 1,997,442
Accrued holiday pay (5,066) 42,498
Share-based payment remuneration charge: equity settled 179,283 141,461
Total emoluments 2,382,755 2,181,401
6. Directors’ remuneration
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Directors
Aggregate emoluments 396,490 495,223
Compensation for loss of ofﬁce — 91,250
Company pension contributions 16,469 22,309
412,959 608,782
Share based payment remuneration charge: equity settled 129,540 102,212
Total Directors’ emoluments 542,499 710,994
Emoluments disclosed above include the following amounts in respect of the highest paid Director:
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Aggregate emoluments 201,473 188,191
Company pension contributions 10,018 9,362
Share based payment remuneration charge: equity settled 88,087 69,504
Total of the highest paid Director’s emoluments 299,578 267,057
During the year, two Directors (2012: four Directors) participated in deﬁned contribution pension
schemes.
Directors’ emoluments include amounts attributable to beneﬁts in kind comprising private medical
insurance on which the directors are assessed for tax purposes. The amounts attributable to beneﬁts in
kind are stated at cost to the Group, which is also the tax value of the attributable beneﬁts.
Further details of Directors’ emoluments are included in the Remuneration report on pages 14 to 17.
Provexis plc Annual report and accounts 2013 36
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 7. Finance income and costs
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Finance income
Bank interest receivable 12,407 46,853
12,407 46,853
Finance costs
Interest payable on bank loans and overdrafts 190 —
Interest payable on asset loans 3,085 742
3,275 742
8. Taxation
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Current tax income
United Kingdom corporation tax – research and development credit 65,740 150,000
Adjustment in respect of prior period
United Kingdom corporation tax – research and development credit 57,297 —
United Kingdom corporation tax – other adjustments 67,267 —
Total current tax income 190,304 150,000
Deferred tax
Origination and reversal of temporary differences 65,682 178,538
Tax on loss for the year 255,986 328,538
The tax assessed for the year is different from the standard rate of corporation tax in the UK. The
differences are explained below:
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Loss before tax 4,647,692 4,284,026
Loss before tax multiplied by the
standard rate of corporation tax in the UK of 24% (2012: 26%) 1,115,446 1,113,846
Effects of:
Expenses not deductible for tax purposes (48,095) (343,565)
Difference between depreciation and capital allowances (17,564) 19,432
Other short-term timing differences (661,853) (37,930)
Unutilised tax losses and other deductions arising in the year (255,246) (479,391)
Additional deduction for R&D expenditure 154,354 221,808
Surrender of tax losses for R&D tax credit refund (77,692) (150,000)
Share scheme deduction 35,676 —
Adjustments in respect of prior years (3,842) —
Effect of rate change on deferred tax balances 14,802 (15,662)
Total tax credit for the year 255,986 328,538
At 31 March 2013 the Group UK tax losses to be carried forward are estimated to be £17,622,991
(2012: £16,504,434).
The rate change from 24% to 23% had been substantively enacted by the balance sheet date, so
deferred tax is provided for at a rate of 23%.
Provexis plc Annual report and accounts 2013 37
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued The 2013 Budget conﬁrmed that the main rate of UK corporation tax was to be reduced from 23% to
21% from 1 April 2014, and announced a further reduction to 20% from 1 April 2015.
The proposed changes had not been substantively enacted by the balance sheet date and it is not yet
possible to quantify the full effect of the further rate reductions, although they will further reduce the
company’s future current tax charges and reduce the deferred tax assets accordingly.
Income tax asset receivable within one year 31 March
2013
31 March
2012
£ £
Corporation tax recoverable 288,801 300,000
288,801 300,000
9. Loss per share
Basic and diluted loss per share amounts are calculated by dividing the loss attributable to owners of the
parent by the weighted average number of ordinary shares in issue during the period.
There are 90,071,648 share options in issue (2012: 94,071,648) that are all currently anti-dilutive and
have therefore been excluded from the calculations of the diluted loss per share.
Basic and diluted loss per share amounts are in respect of all activities.
Year ended
31 March
2013
Year ended
31 March
2012
Loss for the year attributable to owners of the parent – £ 4,338,600 3,873,215
Weighted average number of shares 1,502,924,005 1,398,837,335
Basic and diluted loss per share – pence 0.29 0.28
Provexis plc Annual report and accounts 2013 38
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
8. Taxation (continued) 10. Acquisition
On 24 June 2011 the Group acquired 100% of the share capital of SiS (Science in Sport) Limited, a
company which manufactures and sells sports nutrition products.
The purchase has been accounted for under the acquisition method of accounting.
The Group has identiﬁed the fair values of the assets acquired and liabilities assumed, including the
separate identiﬁcation of intangible assets in accordance with IFRS 3 ‘Business Combinations’. This
formal process involves an assessment of the assets acquired and liabilities assumed with assistance
provided by external valuation specialists where appropriate. The assessment period remains open up to
a maximum of 12 months from the relevant acquisition date. The assessment was completed in the
period ended 24 June 2012 and accordingly the fair values presented are now ﬁnal.
Adjustments are made to the assets acquired and liabilities assumed during the assessment period to
the extent that further information and knowledge come to light that more accurately reﬂect conditions at
the acquisition date. In this context the fair value of inventories acquired was decreased by £61,103
during the year, with a commensurate increase in goodwill.
Goodwill arose on the acquisition of SiS
1
because the cost of the combination included amounts in
relation to the beneﬁt of expected synergies, revenue growth, future market development and the
assembled workforce of SiS
1
. These beneﬁts are not recognised separately from goodwill because they
do not meet the recognition criteria for identiﬁable intangible assets. A summary of the effect of the
acquisition is detailed below:
Book value at
acquisition
Fair value
adjustments
Fair value
££ £
Website costs capitalised 16,201 — 16,201
Trademarks — 1,004,029 1,004,029
Patents / recipes / formulations — 180,886 180,886
Covenants not to compete — 22,480 22,480
Customer relationships — 1,228,696 1,228,696
Property, plant and equipment 140,155 — 140,155
Inventories 711,010 (94,103) 616,907
Trade and other receivables 809,444 — 809,444
Net cash 213,964 — 213,964
Trade and other payables (658,223) — (658,223)
Tax and deferred tax (67,267) (584,662) (651,929)
1,165,284 1,757,326 2,922,610
Goodwill 4,437,991
Consideration 7,360,601
Satisﬁed by:
cash consideration 6,750,000 — 6,750,000
non-cash consideration (issue of shares) 1,000,000 (639,399)* 360,601
cash consideration held in escrow 250,000 — 250,000
8,000,000 (639,399) 7,360,601
Net cash acquired (213,964)
Transaction costs and expenses 153,163
Total net cost of acquisition 7,299,800
The Company now intends to separate SiS (Science in Sport) Limited from the Provexis Group by way
of a demerger, further details of which are provided in note 26.
Provexis plc Annual report and accounts 2013 39
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 11. Intangible assets
Goodwill Development
costs
Trademarks Patents /
recipes /
formulations
Covenants
not to
compete
Customer
relationships
Website
development
costs
Total
£££ ££££ £
Cost
At 1 April 2012 11,642,165 132,621 1,004,029 180,886 22,480 1,228,696 9,514 14,220,391
Additions 61,103 25,545 — — — — 165,485 252,133
At 31 March 2013 11,703,268 158,166 1,004,029 180,886 22,480 1,228,696 174,999 14,472,524
Amortisation and
impairment
At 1 April 2012 4,603,398 38,546 81,027 20,696 5,745 99,158 2,218 4,850,788
Charge for year — — 105,687 26,995 7,493 129,337 17,223 286,735
Impairment 2,661,879 119,620 — — — — — 2,781,499
At 31 March 2013 7,265,277 158,166 186,714 47,691 13,238 228,495 19,441 7,919,022
Net book value
At 31 March 2013 4,437,991 — 817,315 133,195 9,242 1,000,201 155,558 6,553,502
At 31 March 2012 7,038,767 94,075 923,002 160,190 16,735 1,129,538 7,296 9,369,603
Cost
At 1 April 2011 7,265,277 75,892 — — — — — 7,341,169
Acquisitions 4,376,888 — 1,004,029 180,886 22,480 1,228,696 16,201 6,829,180
Additions — 56,729 — — — — 5,627 62,356
Disposals — — — — — — (12,314) (12,314)
At 31 March 2012 11,642,165 132,621 1,004,029 180,886 22,480 1,228,696 9,514 14,220,391
Amortisation and
impairment
At 1 April 2011 3,462,592 — — — — — — 3,462,592
Charge for year 1,140,806 38,546 81,027 20,696 5,745 99,158 4,660 1,390,638
Disposals ———— —— (2,442) (2,442)
At 31 March 2012 4,603,398 38,546 81,027 20,696 5,745 99,158 2,218 4,850,788
Net book value
At 31 March 2012 7,038,767 94,075 923,002 160,190 16,735 1,129,538 7,296 9,369,603
At 31 March 2011 3,802,685 75,892 — — — — — 3,878,577
Development costs represent costs incurred in registering patents that meet the capitalisation criteria set
out in IAS 38, see also note 1.
Further detail on the components of acquisition intangibles is provided in Note 10.
Provexis plc Annual report and accounts 2013 40
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 12. Goodwill and impairment
Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value
of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition. The
consolidated balance sheet of the Group includes goodwill relating to two cash generating units (CGUs),
Provexis, in respect of Fruitﬂow
1
, and SiS.
The carrying amount of goodwill is allocated to the CGUs as follows:
Goodwill carrying amount
Year ended 31 March 2013
£
Year ended 31 March 2012
£
Provexis SiS Total Provexis SiS Total
At start of year 2,661,879 4,376,888 7,038,767 3,802,685 — 3,802,685
Additions — 61,103 61,103 — 4,376,888 4,376,888
Impairment charge for year (2,661,879) — (2,661,879) (1,140,806) — (1,140,806)
At end of year — 4,437,991 4,437,991 2,661,879 4,376,888 7,038,767
Under IAS 36, management must test this goodwill for impairment annually by comparing the carrying
value of assets in each CGU with either the ‘fair value less costs to sell’ or the ‘value in use’ of the
CGU.
The Group determines the recoverable amount of goodwill based on value in use calculations of the
cash-generating units to which goodwill has been allocated. The major assumptions used in these
calculations are as follows:
2013 2012
Provexis SiS Provexis SiS
%%%%
Pre-tax discount rate 15.8 13.0 15.8 13.0
Growth rate* 2.0 10.0 2.0 10.0
Growth rate in perpetuity 0.0 3.0 0.0 3.0
Year 1 to 5 growth rate N/A 15.0 — —
Gross proﬁt margin N/A 60.3 to 64.0 — —
* The growth rate for cash ﬂows from operating activities applies only to the period beyond the formal
budgeted period with the value in use calculation based on an extrapolation of the budgeted cash ﬂows
for year nine for Provexis (2012: year seven) and year six (2012: year three) for SiS.
Signiﬁcant judgement is exercised in determining the underlying assumptions used in the impairment
review; the assumptions include the discount rate, operating margin and growth rate.
Management estimate discount rates using pre-tax rates that reﬂect the current market assessment of
the time value of money and the risks speciﬁc to the cash-generating unit. The pre-tax discount rate is
based on a number of factors including the risk-free rate in the UK, the Group’s estimated market risk
premium, and a premium to reﬂect the inherent risk of the forecast income streams included in the
Group’s cash ﬂow projections, which remain subject to contracts being agreed with prospective
customers.
Operating margins are based on past practices and expectations of future changes in the market.
Growth rates are based on information received from commercial partners and market intelligence
reports on expectations of future changes in the market. The growth rate used in Provexis is below the
long-term growth rate for the Nutraceuticals industry.
The Directors believe that it is appropriate to use internally approved forecasts for a period of more than
the 5 years recommended by IFRS as they consider this will give a more accurate estimate of the likely
growth patterns in the early stages of the product’s life and better reﬂect the growth of the sports
nutrition market than the application of a single growth rate.
Provexis plc Annual report and accounts 2013 41
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued IAS 36 stipulates that future cash ﬂows shall be estimated for assets in their current condition. Estimates
of future cash ﬂows should not include estimated future cash inﬂows or outﬂows that are expected to
arise from a future restructuring, to which an entity is not yet committed at the balance sheet date.
On 28 June 2013 the Company announced its intention to separate SiS (Science in Sport) Limited from
the Provexis Group by way of a demerger, as further detailed in note 26, with a consequent signiﬁcant
reduction in the annual central running costs of the Provexis Group. For the purposes of IAS 36 the
proposed demerger amounts to a future restructuring to which an entity is not yet committed, hence the
future estimated cash ﬂows of the Provexis CGU do not include the signiﬁcant annual central cost
savings which are expected to result from the demerger.
Using the discount rate and growth rates shown in the table above, and without taking into account the
signiﬁcant annual central cost savings which are expected to result from the demerger, the carrying
amount of the Provexis CGU exceeds its recoverable amount, hence a total non cash impairment loss of
£2,781,499 has been recognised in the year, as further detailed in note 11. The impairment loss is made
up of the existing £2,661,879 carrying value of the Provexis CGU, and the related £119,620 of intangible
assets, in respect of previously capitalised intangible development costs.
The values used in the Group’s internal forecasts reﬂect anticipated market developments, following
discussions with prospective customers and suppliers. An element of the risk inherent in the forecast
income streams, which remain subject to contracts being agreed with prospective customers, has been
incorporated in the Group’s pre-tax cash ﬂow projections and discount rates.
The results of the value in use calculations for the CGUs are as follows:
* Provexis exceeds its carrying amount by £NIL (2012: £971,516)
* SiS exceeds its carrying amount by £8,778,687 (2012: £442,581)
If any one of the following changes were made to the above key assumptions, the carrying amount and
recoverable amount would be equal:
Provexis SiS*
2013 %%
Pre-tax discount rate — increase from 13.0% to 20.9%
Growth ratein perpetuity — reduction from 3% to NIL
Year 1 to 5 growth rate — reduction from 15% to 9.6%
Gross proﬁt margin — reduction from 64% to 53%
2012
Pre-tax discount rate increase from 15.8% to 18.4% increase from 13.0% to 13.5%
Growth rate Not sensitive reduction from 10.0% to 8.3%
Growth ratein perpetuity Not sensitive reduction from 3% to 2.0%
Provexis plc Annual report and accounts 2013 42
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
12. Goodwill and impairment (continued) 13. Plant and equipment
Leasehold
improvements
Fixtures,
ﬁttings,
plant and
equipment
Laboratory
equipment
Motor
vehicles
Total
££££ £
Cost
At 1 April 2012 219,247 410,395 147,145 11,527 788,314
Additions 11,709 251,925 — — 263,634
Disposals — (3,275) — — (3,275)
At 31 March 2013 230,956 659,045 147,145 11,527 1,048,673
Depreciation
At 1 April 2012 10,706 90,699 84,270 4,209 189,884
Charge for the year 48,000 109,548 24,999 5,165 187,712
Impairment – site closure — — 37,876 — 37,876
Disposals — (1,719) — — (1,719)
At 31 March 2013 58,706 198,528 147,145 9,374 413,753
Net book value
At 31 March 2013 172,250 460,517 — 2,153 634,920
At 31 March 2012 208,541 319,696 62,875 7,318 598,430
Leasehold
improvements
Fixtures,
ﬁttings,
plant and
equipment
Laboratory
equipment
Motor
vehicles
Total
££££ £
Cost
At 1 April 2011 — 64,598 128,242 — 192,840
Acquisitions — 127,120 — 13,035 140,155
Additions 219,247 220,834 18,903 — 458,984
Disposals — (2,157) — (1,508) (3,665)
At 31 March 2012 219,247 410,395 147,145 11,527 788,314
Depreciation
At 1 April 2011 — 47,069 56,002 — 103,071
Charge for the year 10,706 44,669 28,268 5,717 89,360
Disposals — (1,039) — (1,508) (2,547)
At 31 March 2012 10,706 90,699 84,270 4,209 189,884
Net book value
At 31 March 2012 208,541 319,696 62,875 7,318 598,430
At 31 March 2011 — 17,529 72,240 — 89,769
The carrying amount of ﬁxtures, ﬁttings, plant and equipment includes an amount of £245,266 (2012:
£Nil) in respect of assets held under an asset loan agreement.
Provexis plc Annual report and accounts 2013 43
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 14. Inventories
31 March
2013
31 March
2012
£ £
Raw materials 503,093 351,744
Finished goods 410,294 284,027
913,387 635,771
There is £Nil (2012: £61,103) included within inventories in relation to assets held at fair value less costs
to sell acquired with SiS. During the year inventories of £1,746,504 (2012: £1,252,233) were recognised
as an expense within cost of sales.
15. Trade and other receivables
31 March
2013
31 March
2012
£ £
Amounts receivable within one year:
Trade receivables 755,106 600,649
Less: provision for impairment of trade receivables (32,233) (32,101)
Trade receivables – net 722,873 568,548
Other receivables 124,615 178,571
Total ﬁnancial assets other than cash and cash equivalents classiﬁed as loans
and receivables 847,488 747,119
Prepayments and accrued income 405,817 187,654
Total trade and other receivables 1,253,305 934,773
Trade receivables represent debts due for the sale of goods to customers. The provision for impairment
of receivables is estimated by the Group’s management based on prior experience.
The balance at 31 March 2013 of £1,253,305 is £318,532 greater than the prior year due predominantly
to an increase in trade receivables and prepayments.
Trade receivables are denominated in Sterling. The Directors consider that the carrying amount of these
receivables approximates to their fair value. Trade and other receivables are categorised as loans and
receivables under IAS 39.
All amounts shown under receivables fall due for payment within one year.
At 31 March 2013, £Nil (2012: £476,551) of trade receivables had been sold to a provider of invoice
discounting and debt factoring services. The invoice discounting and debt factoring service was cancelled
in September 2012.
The Group does not hold any collateral as security.
As at 31 March 2013 trade receivables of £125,319 (2012: £154,902) were past due but not impaired.
They relate to customers with no default history. The ageing analysis of these receivables is as follows:
31 March
2013
31 March
2012
£ £
Up to 3 months 125,319 154,902
125,319 154,902
As at 31 March 2013 trade receivables of £32,233 (2012: £32,101) were past due and impaired. The
amount of the provision as at 31 March was £32,233 (2012: £32,101).
Provexis plc Annual report and accounts 2013 44
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued Movements on the group provision for impairment of trade receivables are as follows
31 March
2013
31 March
2012
£ £
At beginning of the year 32,101 —
Provided during the year 5,750 32,101
Receivable written off during the year as uncollectible — —
Unused amounts reversed (5,618) —
32,233 32,101
The movement on the provision for impaired receivables has been included in administrative expenses in
the consolidated statement of comprehensive income.
Other classes of ﬁnancial assets included within trade and other receivables do not contain impaired
assets.
16. Cash and cash equivalents
31 March
2013
31 March
2012
£ £
Cash at bank and in hand 616,612 1,447,405
616,612 1,447,405
17. Trade and other payables
31 March
2013
31 March
2012
£ £
Trade payables 929,939 894,535
Other payables 109,171 43,341
Accruals 680,805 513,377
Total ﬁnancial liabilities measured at amortised cost 1,719,915 1,451,253
Other taxes and social security 67,654 90,586
Total trade and other payables 1,787,569 1,541,839
The Directors consider that the carrying amount of these liabilities approximates to their fair value.
All amounts shown fall due within one year.
18. Borrowings
31 March
2013
31 March
2012
£ £
Secured borrowings at amortised cost
Asset loan agreement at ﬁxed rate 226,645 —
226,645 —
Amounts due for settlement within 12 months 64,774 —
Amounts due for settlement after 12 months 161,871 —
226,645 —
The asset loan agreement was provided in September 2012 by HSBC Asset Finance (UK) Limited, and
it is secured over plant and equipment acquired by SiS
1
at its Nelson factory. The asset loan
agreement is for a four year term, expiring in September 2016, at a ﬁxed interest rate of 3.96%.
Provexis plc Annual report and accounts 2013 45
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
15. Trade and other receivables (continued) 19. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of
23% (2012: 24%).
Details of the deferred tax asset and liability, amounts recognised in proﬁt or loss and amounts
recognised in other comprehensive income are as follows:
Asset
2013
Liability
2013
Net
2013
(Charged) /
credited to
proﬁt or loss
2013
(Charged) /
credited to
equity
2013
££ ££ £
Business combinations — (450,789) (450,789) 84,283 —
Available losses 110,348 — 110,348 (18,600) —
Net tax assets / (liabilities) 110,348 (450,789) (340,441) 65,683 —
Asset
2012
Liability
2012
Net
2012
(Charged) /
credited to
proﬁt or loss
2012
(Charged) /
credited to
equity
2012
££ ££ £
Business combinations — (535,072) (535,072) 49,590 —
Available losses 128,948 — 128,948 128,948 —
Net tax assets / (liabilities) 128,948 (535,072) (406,124) 178,538 —
A deferred tax asset of £110,348 (2012: £128,948) has been recognised in respect of tax losses in SiS
and other temporary differences giving rise to deferred tax assets where the directors believe it is
probable that these assets will be recovered. The Directors have made this assessment based on the
evidence available from projected budgets, forecasts of proﬁtability and post year end proﬁtability of the
entity.
Deferred tax assets amounting to £4,030,256 (2012: £4,199,712) have not been recognised on the basis
that their future economic beneﬁt is not certain. Assuming a prevailing tax rate of 23% (2012: 24%)
when the timing differences reverse, the unrecognised deferred tax asset comprises:
Year ended
31 March
2013
Year ended
31 March
2012
£ £
Depreciation in excess of capital allowances 23,068 38,846
Other short term timing differences 1,540 7,314
Unutilised tax losses 3,922,672 3,832,116
Share-based payments 82,976 321,436
4,030,256 4,199,712
Provexis plc Annual report and accounts 2013 46
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 20. Share capital
On 8 November 2011 the Company announced that it had signed a new 3 year Equity Financing Facility
(‘‘EFF’’) of up to £25m with Darwin Strategic Limited (‘‘Darwin’’). The new facility replaced the
Company’s existing EFF and warrant agreements with Darwin, dated 30 March 2010, which have
accordingly been cancelled.
The EFF agreement provides the Company with a facility which (subject to certain limited restrictions)
can be drawn down at any time over the 3 years ending on 6 November 2014. The timing and amount
of any draw down is at the discretion of Provexis. Provexis is under no obligation to make a draw down
and may make as many draw downs as its wishes, up to the total value of the EFF, by way of issuing
subscription notices to Darwin. Following delivery of a subscription notice, Darwin will subscribe and
Provexis will allot to Darwin new ordinary shares of 0.1p each (‘‘Ordinary Shares’’).
The subscription price for any Ordinary Shares to be subscribed by Darwin under a subscription notice
will be at a 7.5% discount to an agreed reference price determined during 5, 10 or 15 trading days
following delivery of a subscription notice (the ‘‘Pricing Period’’). The length of the Pricing Period is at
the discretion of Provexis and is set at each relevant subscription notice. Provexis is also obliged to
specify in each subscription notice a minimum price below which Ordinary Shares will not be issued.
Warrant reserve
In consideration of Darwin agreeing to provide the EFF the Company entered into a new warrant
agreement dated 7 November 2011 for the grant to Darwin of warrants to subscribe for up to ten million
Ordinary Shares, such warrants to be exercisable at a price of 5 pence per share and to be exercisable
at any time prior to the expiry of 36 months following the date of the new warrant agreement. The ten
million warrants issued to Darwin in conjunction with the March 2010 EFF have been cancelled.
The warrants were measured at fair value at the date of grant using a Black-Scholes model, with the
following assumptions:
Date of grant Exercise
price
pence
Number of
warrants
Share
price at
grant date
pence
Expected
volatility
Risk free
rate
Expected
life
years
Fair value
per share
under
warrant
pence
7-Nov-11 5.0 10,000,000 2.0 75% 3.00% 3 0.6
An expected dividend yield of 0% was used in the above valuation.
The assumption made for the expected life of the warrants is not necessarily indicative of the exercise
patterns that may occur. The expected volatility reﬂects the assumption that the historical volatility is
indicative of future trends, which may not necessarily be the actual outcome.
The total fair value of the warrants, £60,000, has been held on the balance sheet within prepayments
and in the warrants reserve within equity. The prepayment will be released against share premium as
the equity ﬁnancing facility is utilised. The warrants reserve will be released to share premium when the
warrants are exercised. If the warrants lapse then the reserve is transferred to retained earnings.
Darwin or the Company may terminate the EFF in speciﬁed circumstances. The issue of subscription
notices is subject to speciﬁed pre-conditions. The Company has provided warranties and indemnities to
Darwin and afﬁliated persons. If the aggregate price paid for the Ordinary Shares allotted under the EFF
by the second anniversary of the EFF is not equal to or more than two and a half million pounds
(subject to certain exceptions), or if the EFF is terminated by Darwin in certain circumstances, then the
Company will be required to pay a fee to Darwin amounting to a maximum of £125,000 in cash or by an
issue of fully paid Ordinary Shares at the company’s discretion (such fee reducing pro rata with
reference to the aggregate price paid for the Ordinary Shares allotted under the EFF at the date the fee
becomes payable).
Provexis plc Annual report and accounts 2013 47
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued Share re-organisation
In August 2008, to facilitate a share placing, the company undertook a share re-organisation when it was
agreed to sub-divide each of the 401,724,366 then issued existing ordinary shares of 1p each in the
capital of the Company into one new ordinary share of 0.1p and one Deferred Share of 0.9p; and each
of the 148,275,634 unissued ordinary shares of 1p each into 10 new ordinary shares of 0.1p each.
The rights attached to the new ordinary shares are substantially the same as the rights attached to the
original, pre placing ordinary shares. The Deferred Shares have very limited rights which are deferred to
the new ordinary shares and effectively carry no value as a result. Accordingly, the holders of the
Deferred Shares are not entitled to receive notice of, attend or vote at general meetings of the
Company; nor be entitled to receive any dividends or any payment on a return of capital until at least
£10,000,000 has been paid on each new ordinary share. No application will be made for the Deferred
Shares to be admitted to trading on AIM. No certiﬁcates for the Deferred Shares will be issued.
Full details of the share re-organisation were provided in a circular to shareholders on 1 August 2008.
The circular is available to download from the Company’s website www.provexis.com.
Allotted, called up and fully paid
Ordinary
0.1p shares
Deferred
0.9p shares
Total
number number number
At 31 March 2012 1,469,832,215 401,724,366 1,871,556,581
Issued on exercise of share options 4,000,000 — 4,000,000
Issued on subscription – equity ﬁnancing facility 44,818,764 — 44,818,764
At 31 March 2013 1,518,650,979 401,724,366 1,920,375,345
Ordinary
0.1p shares
Deferred
0.9p shares
Total
£££
At 31 March 2012 1,469,833 3,615,519 5,085,352
Issued on exercise of share options 4,000 — 4,000
Issued on subscription – equity ﬁnancing facility 44,818 — 44,818
At 31 March 2013 1,518,651 3,615,519 5,134,170
Allotted, called up and fully paid
Ordinary
0.1p shares
Deferred
0.9p shares
Total
number number number
At 31 March 2011 1,196,516,929 401,724,366 1,598,241,295
Issued on exercise of share options 3,000,000 — 3,000,000
Issued on acquisition 35,335,689 — 35,335,689
Issued on placing 166,666,662 — 166,666,662
Issued on open offer 68,312,935 — 68,312,935
At 31 March 2012 1,469,832,215 401,724,366 1,871,556,581
Ordinary
0.1p shares
Deferred
0.9p shares
Total
£££
At 31 March 2011 1,196,517 3,615,519 4,812,036
Issued on exercise of share options 3,000 — 3,000
Issued on acquisition 35,336 — 35,336
Issued on placing 166,667 — 166,667
Issued on open offer 68,313 — 68,313
At 31 March 2012 1,469,833 3,615,519 5,085,352
Provexis plc Annual report and accounts 2013 48
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
20. Share capital (continued) During the year ended 31 March 2013 the Company issued ordinary shares of 0.1p each as follows:
Date Reason for issue Shares issued
£ Number
27.04.12 Exercise of share options 4,000 4,000,000
23.05.12 Share subscription – equity ﬁnancing facility 13,198 13,197,880
03.09.12 Share subscription – equity ﬁnancing facility 31,620 31,620,884
48,818 48,818,764
During the year ended 31 March 2012 the Company issued ordinary shares of 0.1p each as follows:
Date Reason for issue Shares issued
£ Number
24.06.11 Acquisition 35,336 35,335,689
24.06.11 Placing 166,667 166,666,662
27.07.11 Open offer 68,313 68,312,935
13.12.11 Exercise of share options 3,000 3,000,000
273,316 273,315,286
As part of the proposed demerger, detailed in note 26, the directors intend to cancel the deferred
shares.
21. Share options
In June 2005 the Company adopted a new share option scheme for employees (’’the Provexis 2005
share option scheme’’). Under the scheme, options to purchase ordinary shares are granted by the
Board of Directors, subject to the exercise price of the option being not less than the market value at
the grant date. The options typically vest after a period of 3 years and the vesting schedule is subject to
predetermined overall company selection criteria. In the event that the option holder’s employment is
terminated, the option may not be exercised unless the Board of Directors so permits. The options
expire 10 years from the date of grant.
The Company undertook a reverse takeover of Provexis Natural Products Limited (‘‘PNP’’, formerly
Provexis Limited) in June 2005 through a share for share exchange. Prior to the takeover the Company
and PNP had granted EMI options and unapproved options. Options granted by the Company prior to
the takeover remain subject to the same terms as contained in the individual share option contracts
under which they were originally granted. The PNP EMI options and unapproved options were rolled
over into options over the Company’s ordinary shares, and these replacement options remain subject to
the same terms as contained in the individual PNP share option contracts under which they were
originally granted.
At 31 March 2013 the number of ordinary shares subject to options granted over the 2005 and prior
option schemes were:
EMI options
31 March 2013 31 March 2012
Weighted
average
exercise
price
(pence)
Weighted
average
share price
at date of
exercise
(pence)
Number Weighted
average
exercise
price
(pence)
Number
Outstanding at the beginning of the year 1.42 — 59,802,021 1.07 51,552,031
Granted during the year —— — 2.80 27,949,990
Exercised during the year 0.90 2.00 (4,000,000) 0.90 (3,000,000)
Cancelled during the year —— — 2.80 (16,700,000)
Outstanding at the end of the year 1.44 — 55,802,021 1.42 59,802,021
Provexis plc Annual report and accounts 2013 49
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
20. Share capital (continued)
Share re-organisation (continued) The exercise price of EMI options outstanding at the end of the year ranged between 0.9p and 6.28p
(2012: 0.9p and 6.28p) and their weighted average contractual life was 3.9 years (2012: 6.9 years).
Of the total number of EMI options outstanding at the end of the year, 44,552,031 (2012: 37,385,456)
had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.09
pence (2012: 1.16 pence).
Unapproved options
31 March 2013 31 March 2012
Weighted
average
exercise
price
(pence)
Number Weighted
average
exercise
price
(pence)
Number
Outstanding at the beginning of the year 2.28 34,269,627 1.18 10,919,617
Granted during the year —— 2.80 23,350,010
Outstanding at the end of the year 2.30 34,269,627 2.28 34,269,627
The exercise price of unapproved options outstanding at the end of the year ranged between 0.9p and
6.28p (2012: 0.9p and 6.28p) and their weighted average contractual life was 6.9 years (2012: 8 years).
Of the total number of unapproved options outstanding at the end of the year, 10,919,617 (2012:
10,919,617) had vested and were exercisable at the end of the year. Their weighted average exercise
price was 1.23 pence (2012: 1.18 pence).
Grant of options
The fair values of the options have been estimated at the date of grant using a Black-Scholes model,
using the following assumptions:
Tranche Date of
grant
Exercise
price
pence
Number of
options
Share price
at grant date
pence
Expected
volatility
Risk free
rate
Expected
life
years
Fair value
per share
under
option
pence
1 06-Jun-07 2.875 17,304,347 2.75 78% 4.44% 10 1.42
2 29-Nov-07 3.38 2,751,479 3.00 65% 3.77% 10 1.06
3 26-Aug-08 0.9 44,166,575 0.87 65% 4.45% 10 0.585
4 01-Oct-08 0.9 12,000,000 0.725 65% 4.39% 10 0.485
5 17-Jun-11 2.8 51,300,000 2.00 88% 4.48% 10 1.17
An expected dividend yield of 0% has been used in all of the above valuations.
The expected life of the options is based on historical data and is not necessarily indicative of the
exercise patterns that may occur. The expected volatility reﬂects the assumption that the historical
volatility is indicative of future trends, which may not necessarily be the actual outcome.
The total charge for the year relating to employee share-based payment plans was £179,283 (2012:
£141,461) all of which related to equity settled share-based payment transactions.
The Company carried out a share re-organisation on 28 August 2008, which is further detailed in note
20 to the consolidated ﬁnancial statements.
Share options which had been granted prior to 28 August 2008 over existing ordinary shares with a
nominal value of 1p each in the capital of the Company became options over new ordinary shares with
a nominal value of 0.1p each in the capital of the Company. The options remain subject to the same
terms as contained in the individual option contracts under which they were originally granted.
Share options issued after 28 August 2008 are options over new ordinary shares with a nominal value of
0.1p each in the capital of the Company.
Provexis plc Annual report and accounts 2013 50
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued
21. Share options (continued)
EMI options (continued) 22. Reserves
Share
premium
reserve
Warrant
reserve
Merger
reserve
Retained
earnings
Total
attributable
to equity
holders of
the parent
Non-
controlling
interest
Total
reserves
££££ £££
At 31 March 2011 16,909,650 115,980 6,273,909 (16,493,986) 6,805,553 (136,459) 6,669,094
Loss for the year — — — (3,873,215) (3,873,215) (82,273) (3,955,488)
Share-based charges — — — 141,461 141,461 — 141,461
Issue of shares – acquisition — — 325,265 — 325,265 — 325,265
Issue of shares – placing 2,333,333 — — — 2,333,333 — 2,333,333
Issue costs – placing (199,380) — — — (199,380) — (199,380)
Issue of shares – open offer 956,381 — — — 956,381 — 956,381
Issue costs – open offer (37,539) — — — (37,539) (37,539)
Issue of shares – exercise of share
options
24,000 — — — 24,000 — 24,000
Warrants cancelled during the year
– equity ﬁnancing facility
12,387 (115,980) — — (103,593) — (103,593)
Warrants issued during the year –
equity ﬁnancing facility
— 60,000 — — 60,000 — 60,000
At 31 March 2012 19,998,832 60,000 6,599,174 (20,225,740) 6,432,266 (218,732) 6,213,534
Loss for the year — — — (4,338,600) (4,338,600) (53,106) (4,391,706)
Share-based charges — — — 179,283 179,283 — 179,283
Issue of shares – exercise of share
options
32,000 — — — 32,000 — 32,000
Issue of shares – equity ﬁnancing
facility 23 May 2012
230,504 — — — 230,504 — 230,504
Issue of shares – equity ﬁnancing
facility 3 September 2012
508,087 — — — 508,087 — 508,087
At 31 March 2013 20,769,423 60,000 6,599,174 (24,385,057) 3,043,540 (271,838) 2,771,702
The following describes the nature and purpose of each reserve within total equity:
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of nominal value.
Warrant reserve The warrant reserve arose in March 2010 when the Group issued warrants to
Evolution Securities Limited as part of the Equity Financing Facility (see Note 20).
ThesewarrantswerecancelledandnewwarrantswereissuedtoDarwinStrategic
Limited on the renewal of the Equity Financing Facility in November 2011.
Merger reserve The merger reserve arose on the reverse takeover in 2005 of Provexis Natural
Products Limited (formerly Provexis Limited) by Provexis plc through a share for
share exchange and on the issue of shares for the acquisition of SiS (Science in
Sport) Limited in 2011.
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
23. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds
which during the year ended 31 March 2013 amounted to £24,903 (2012: £42,434). Pension
contributions payable but not yet paid at 31 March 2013 totalled £9,057, in respect of pension
contribution entitlements where employees had not yet provided details of the funds to which the
contributions should be made (2012: £30,474).
Provexis plc Annual report and accounts 2013 51
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued 24. Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases are as follows:
31 March
2013
31 March
2012
£ £
Due within 1 year 189,403 146,456
Due between 1 year and 2 years 151,342 152,500
Due between 2 years and 5 years 186,762 372,500
527,507 671,456
Operating lease payments primarily represent rentals payable by the Group for various ofﬁces. The
leases have various terms, escalation clauses and renewal rights typical of lease agreements for the
class of asset.
25. Related party transactions
On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM Nutritional
Products, which has seen the Company collaborate with DSM to develop Fruitﬂow
1
in all major global
markets. DSM will invest substantially in the manufacture, technology development, marketing and sale
of Fruitﬂow
1
in the coming years. Provexis will continue to contribute scientiﬁc expertise and will
collaborate in areas such as cost of goods optimisation and regulatory matters. The ﬁnancial model is
based upon the division of proﬁts between the two partners on an agreed basis, linked to certain
revenue targets, following the deduction of the cost of goods and a ﬁxed level of overhead from sales.
The Company is working closely with DSM in various areas of the project. It is not possible to determine
the ﬁnancial impact of the Alliance Agreement at this time.
DSM is classiﬁed as a related party of the Group in accordance with IAS 24 as it holds shares in the
Group. Further, K Rietveld is a director of the Company, and a senior employee of DSM. The directors
of Provexis (the ‘‘Directors’’), having consulted with Cenkos Securities Limited (‘‘Cenkos Securities’’), the
Company’s nominated adviser, consider that the terms of the Alliance Agreement are fair and reasonable
insofar as Provexis’s shareholders are concerned. In providing advice to the Directors, Cenkos Securities
has taken into account the Directors’ commercial assessments.
Revenue recognised by the Group under agreements with DSM amounted to £34,351 (2012: £5,779). At
31 March 2013 the Group was owed £23,009 (2012: £5,779) by DSM.
Key management compensation
The Directors represent the key management personnel. Details of their compensation and share options
are given in note 6 and within the Remuneration report on pages 14 to 17.
26. Post balance sheet events
On 28 June 2013 the Group announced its intention to separate SiS (Science in Sport) Limited from the
Provexis Group. It is proposed that this separation will be effected by way of a demerger of SiS
(Science in Sport) Limited to a new company called Science in Sport plc. Science in Sport plc will seek
admission of its entire issued and to be issued ordinary share capital to trading on AIM on or around
9 August 2013.
In order to provide ongoing working capital for each of the demerged businesses and to pay the costs
associated with the demerger, Science in Sport plc has announced that it has undertaken a conditional
placing to raise £2.25 million (before commission and expenses).
The demerger and placing are conditional inter alia upon the approval of Provexis plc shareholders at a
General Meeting proposed for 15 July 2013, and the subsequent conﬁrmation of the Company’s
reduction of capital by the Court.
Further information on the proposed demerger and admission of Science in Sport plc to AIM can be
found in the Circular, and Admission to trading on AIM document, which were issued on 28 June 2013.
Copies of the Circular and the Admission to trading on AIM document can be downloaded from Provexis
plc’s website www.provexis.com.
Provexis plc Annual report and accounts 2013 52
c108597pu030Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notestotheconsolidatedﬁnancialstatementscontinued Company number 05102907
Notes
As at
31 March
2013
£
As at
31 March
2012
£
Fixed assets
Investments 3 7,035,336 8,151,922
Current assets
Debtors – due within one year 4 57,962 60,000
Debtors – due after one year 4 1,337,898 5,206,256
Total debtors 1,395,860 5,266,256
Cash and cash equivalents 5 450,591 1,151,476
Total current assets and net current assets 1,846,451 6,417,732
Total assets 8,881,787 14,569,654
Creditors: amounts falling due after more than one year 6 — (239,896)
Net assets 8,881,787 14,329,758
Capital and reserves
Share capital 8 5,134,170 5,085,352
Share premium reserve 9 20,769,423 19,998,832
Warrant reserve 9 60,000 60,000
Retained earnings 9 (17,081,806) (10,814,426)
Equity shareholders’ funds 10 8,881,787 14,329,758
These ﬁnancial statements were approved and authorised for issue by the Board on 28 June 2013.
The notes on pages 54 to 57 form part of these parent company ﬁnancial statements.
Stephen Moon Ian Ford
Director Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2013 53
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Parent company balance sheet 1. Accounting policies
The parent company ﬁnancial statements have been prepared under the historical cost convention and in
accordance with applicable United Kingdom Accounting Standards.
Going concern
The going concern basis has been applied in preparing the parent company ﬁnancial statements for the
reasons identiﬁed and disclosed in note 1 to the consolidated ﬁnancial statements.
Share-based employee remuneration
The Company has no employees however the Company will issue shares to satisfy share awards made
by its subsidiary companies. The Company records a management charge equivalent to the fair value of
the share-based payment incurred by its subsidiaries as disclosed in note 9.
Taxation
Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax balances are recognised in respect of all timing differences that have originated but not
reversed by the balance sheet date, except that the recognition of deferred tax assets is limited to the
extent that the Company anticipates making sufﬁcient taxable proﬁts in the future to absorb the reversal
of the underlying timing differences. Deferred tax balances are not discounted.
Valuation of investments
Investments are stated at cost less any provision for impairment. Proﬁts or losses arising from disposals
of ﬁxed asset investments are treated as part of the result from ordinary activities.
Warrants
The Group has issued warrants to Darwin Strategic Limited as part of the Equity Financing Facility.
These warrants have been measured at fair value at the date of grant using an appropriate options
pricing model. This fair value has been held on the balance sheet within prepayments and in the
warrants reserve within equity. The prepayment will be released against share premium as the equity
ﬁnancing facility is utilised. The warrants reserve will be released to share premium when the warrants
are exercised. If the warrants lapse then the reserve is transferred to retained earnings.
Post balance sheet events
Details of post balance sheet events relevant to the parent company are included in note 26 to the
consolidated ﬁnancial statements.
2. Proﬁt attributable to shareholders
As permitted by Section 408 of the Companies Act 2006 no separate Company proﬁt and loss account
has been included in these ﬁnancial statements. The Group loss for the year includes a loss after tax of
£6,446,663 (2012: £5,091,411) which is dealt with in the ﬁnancial statements of the Company. The total
fees of the Group’s auditor, Chantrey Vellacott DFK LLP, for services provided are analysed in note 4 to
the consolidated ﬁnancial statements. Total fees for the year were £15,000 (2012: £28,000 payable to
BDO LLP).
The parent company did not have any employees in the year and therefore there were no payroll costs
or pension costs (2012: Nil).
Provexis plc Annual report and accounts 2013 54
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notes to the parent company ﬁnancial statements 3. Investments
31 March
2013
31 March
2012
£ £
Cost 8,418,255 8,418,255
Provision for impairment (1,382,919) (266,333)
Net book value 7,035,336 8,151,922
At 31 March 2013 the Company owned the following material subsidiary undertakings:
Share of issued
ordinary share
capital, and
voting rights
Country of
incorporation and
operation
Business activity
Provexis Nutrition Limited 100% England and Wales Functional food,
medical food and
dietary supplement
technologies
Provexis Natural Products Limited 100% England and Wales Functional food,
medical food and
dietary supplement
technologies
Provexis (IBD) Limited 75% England and Wales Functional food,
medical food and
dietary supplement
technologies
SiS (Science in Sport) Limited 100% England and Wales Sports nutrition
There are no signiﬁcant restrictions on the ability of subsidiary undertakings to transfer funds to the
parent, other than those imposed by the Companies Act 2006.
4. Debtors
31 March
2013
31 March
2012
£ £
Debtors falling due within one year
Prepayments 57,962 60,000
Total debtors falling due within one year 57,962 60,000
Debtors falling due after one year
Amounts owed by subsidiaries 1,337,898 5,206,256
Total debtors falling due after one year 1,337,898 5,206,256
Total debtors 1,395,860 5,266,256
5. Cash and cash equivalents
31 March
2013
31 March
2012
£ £
Cash at bank and in hand 450,591 1,151,476
450,591 1,151,476
Provexis plc Annual report and accounts 2013 55
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notes to the parent company ﬁnancial statements continued 6. Creditors: amounts falling due after one year
31 March
2013
31 March
2012
£ £
Creditors falling due after one year
Amounts owed to subsidiaries — (239,896)
Total creditors falling due after one year — (239,896)
7. Deferred tax
Deferred tax assets amounting to £59,331 (2012: £257,959) have not been recognised on the basis that
their future economic beneﬁt is not certain.
8. Share capital
Allotted, called up and fully paid Ordinary
0.1p shares
Deferred
0.9p shares
Total
number number number
At 31 March 2012 1,469,832,215 401,724,366 1,871,556,581
Issued on exercise of share options 4,000,000 — 4,000,000
Issued on subscription – equity ﬁnancing facility 44,818,764 — 44,818,764
At 31 March 2013 1,518,650,979 401,724,366 1,920,375,345
Ordinary
0.1p shares
Deferred
0.9p shares
Total
£££
At 31 March 2012 1,469,833 3,615,519 5,085,352
Issued on exercise of share options 4,000 — 4,000
Issued on subscription – equity ﬁnancing facility 44,818 — 44,818
At 31 March 2013 1,518,651 3,615,519 5,134,170
Allotted, called up and fully paid Ordinary
0.1p shares
Deferred
0.9p shares
Total
Number number number
At 31 March 2011 1,196,516,929 401,724,366 1,598,241,295
Issued on exercise of share options 3,000,000 — 3,000,000
Issued on acquisition 35,335,689 — 35,335,689
Issued on placing 166,666,662 — 166,666,662
Issued on open offer 68,312,935 — 68,312,935
At 31 March 2012 1,469,832,215 401,724,366 1,871,556,581
Ordinary
0.1p shares
Deferred
0.9p shares Total
£££
At 31 March 2011 1,196,517 3,615,519 4,812,036
Issued on exercise of share options 3,000 — 3,000
Issued on acquisition 35,336 — 35,336
Issued on placing 166,667 — 166,667
Issued on open offer 68,313 — 68,313
At 31 March 2012 1,469,833 3,615,519 5,085,352
Details of the share subscriptions, share placings, and the shares issued by the Company during the two
years ended 31 March 2013 are given in note 20 to the consolidated ﬁnancial statements.
Details on the share option scheme and share based payment charge for the year are given in note 21
to the consolidated ﬁnancial statements.
Provexis plc Annual report and accounts 2013 56
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notes to the parent company ﬁnancial statements continued 9. Reserves
Share
premium
reserve
Warrant
reserve
Retained
earnings
££ £
At 1 April 2012 19,998,832 60,000 (10,814,426)
Retained loss for the year — — (6,446,663)
Share-based charges — — 179,283
Issue of shares equity ﬁnancing facility 23 May 2012 230,504 — —
Issue of shares equity ﬁnancing facility 3 September 2012 508,087 — —
Issue of shares – exercise of share options 32,000 — —
At 31 March 2013 20,769,423 60,000 (17,081,806)
10. Shareholders’ funds
Reconciliation of movement in shareholders’ funds.
31 March
2013
31 March
2012
£ £
Loss for year (6,446,663) (5,091,411)
Share-based payment charge (note 21) 179,283 141,461
Shares issued during the year 48,818 273,316
Premium on shares issued 770,591 3,076,795
Reduction of premium on share issue — —
Warrants cancelled on renewal of EFF 8 November 2011 — (103,593)
Warrants issued on renewal of EFF 8 November 2011 — 60,000
Net decrease in shareholders’ funds (5,447,971) (1,643,432)
Opening shareholders’ funds 14,329,758 15,973,190
Closing shareholders’ funds 8,881,787 14,329,758
11. Related party transactions
The Company has taken advantage of the exemption conferred by Financial Reporting Standard 8
‘‘Related party disclosures’’ not to disclose transactions with 100% owned members of the Group headed
Provexis plc on the grounds that 100% of the voting rights of the Company are controlled within that
Group.
Provexis (IBD) Limited is 75% owned by Provexis plc and 25% owned by The University of Liverpool.
Provexis plc wholly owns Provexis Nutrition Limited, SiS (Science in Sport) Limited and Provexis Natural
Products Limited. Provexis Nutrition Limited, Provexis Natural Products Limited, SiS (Science in Sport)
Limited and Provexis (IBD) Limited are under the common control of Provexis plc.
The Company did not trade with Provexis (IBD) Limited during the year ended 31 March 2013 (2012:
Nil). At 31 March 2013 the Company was owed £5,509 by Provexis (IBD) Limited (31 March 2012: owed
£5,509).
Provexis (IBD) Limited does not have a bank account, and all its cash accounting transactions during the
year were processed by Provexis plc and Provexis Natural Products Limited (‘‘Provexis group
companies’’). Amounts transacted by Provexis (IBD) Limited with Provexis group companies are charged
through inter company accounts and the net amount transacted during the year was £212,426 (2012:
£329,091). Provexis (IBD) Limited owed Provexis group companies and Provexis Nutrition limited a total
of £1,968,110 at 31 March 2013 (31 March 2012: owed £1,755,684). Provisions of £1,968,110 (2012:
£1,755,684) have been recognised in the accounts of Provexis group companies and Provexis Nutrition
Limited.
Details of a related party transaction with DSM are given in note 25 to the consolidated ﬁnancial
statements.
Provexis plc Annual report and accounts 2013 57
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Notes to the parent company ﬁnancial statements continued Company number 05102907
Directors C D Buck
J M Clarke
K Rietveld
S N Moon
I Ford
Audit committee C D Buck
J M Clarke
K Rietveld
Remuneration committee C D Buck
J M Clarke
K Rietveld
Registrars Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Secretary and registered ofﬁce I Ford
Kings Road House
2 Kings Road
Windsor
Berkshire SL4 2AG
Nominated adviser and broker Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
Principal solicitors Shoosmiths
Apex Plaza
Forbury Road
Reading
Berkshire RG1 1SH
Auditors Chantrey Vellacott DFK LLP
Prospect House
Queens Road
Reading
Berkshire RG1 4RP
Provexis plc Annual report and accounts 2013 58
c108597pu040Proof2:28.6.13_09:29B/LRevision:0OperatorPutA Company information