Our Strategic Priorities Our strategy is designed to increase growth and improve our long-term financial performance, in support of our ambition to become the most recommended brand by life science researchers. Our strategic priorities What we promised for FY 2017 What we achieved Our next strategic priorities 1. Grow our core reagents business faster than the market Our aim is to generate above market revenue growth from our existing consumer base, as well as by attracting new consumers Continue to drive market share gain for primary antibodies (including rabbit monoclonal antibodies) Retain existing consumers and attract new ones by continuing to improve our digital and offline experiences Continue focus on high quality products which are specific, selective and reproducible in the context for which our consumers use them Put in place a new target selection process and increased the success of new product launches. Further process improvements have shortened lead times and further improved the success rates of launches Increased the number of RabMAb® antibodies in our catalogue to over 11,000 Continued to grow our digital footprint to retain current customers and attract new ones. Our integrated marketing approach is driving better conversion across multiple channels Continued to work closely with suppliers to add validation data to ensure consistent quality supply, as well as delivering improvements in quality by continuing to invest in technologies, including knockout validation of an increasing proportion of our broad recombinant antibody range Sustain antibody and digital marketing leadership Continue high value focus to gain share Continue validation initiative and raising quality standards Implement next phase of digital marketing vision 2. Establish new growth platforms Our aim is to deliver enhanced value by the addition of attractive new product ranges or services in either the same or adjacent segments and by extending Continue to strengthen our position in China Continue to grow our kits and assays business further leveraging our RabMAb® and FirePlex® technologies Increased our geographic reach across China Introduced antibody pairs, RabMAb® antibodies in SimpleStep ELISA® kits and used the FirePlex® platform to expand the kits/assays range by introducing 234 validated antibody pairs and validated a range of these pairs in multiplex immunoassays Expand in related growth markets Grow kits and assays in line with multi-year aspiration Expand the number of ‘Abcam Inside’ projects and framework agreements
our geographic penetration Continue to increase share of unpenetrated segments Grow custom products and licensing Significantly expanded electronic catalogue connections to customers Further expanded our addressable market in custom products and licensing by providing ‘Abcam Inside’ for multiple pharmaceutical and diagnostic development partners 3. Scale organisation capabilities Our aim is to attract and retain the best people, empower them to succeed and build the capabilities necessary to deliver our strategy Finalise Executive Leadership Team hires and integrate and align teams Implement the Oracle Cloud modules successfully and in accordance with the implementation plan Progress activities to consolidate our Cambridge, UK, facilities Hiring of Executive Leadership Team completed with the appointment of new CFO as well as new hires of Senior Vice President of Technology and Senior Vice President of Global Manufacturing & Supply Chain. Re-organised the business to create Research & Development and Global Manufacturing & Supply Chain teams Launched several of the Oracle modules and made good progress towards full ERP implementation Commenced construction of new HQ on the Cambridge Biomedical Campus and on track for build completion at the end of 2018 Invest in operating capabilities to double our scale Further improve organisational engagement Successfully implement Oracle Cloud and complete alignment of organisation Complete implementation of Supply Chain and Manufacturing function 4. Sustain attractive economics Our aim is to ensure operational efficiency and cost effectiveness to deliver sustainable, profitable growth Optimise and further improve custom service role and economics Consolidate procurement and identify cost savings Scale-up of AxioMx production Repositioned our R&D and manufacturing resources to align with our multi-year strategy, and strengthened focus and accountability on manufacturing, new product development and long-term R&D Global procurement function and processes developed and strengthened, including the publication of our Supplier Code of Conduct Sustain attractive economics Deliver major capital projects with planned costs and time Realise productivity gains Move to direct distribution in at least one additional market volume
AxioMx fit-out completed on time and to budget, doubling capacity for in vitro recombinant binder discovery and validation. Successfully completed a number of milestones relating to AxioMx’s intellectual property and technology development and added new products to the catalogue 5. Selectively pursue partnerships and acquisitions Our aim is to supplement the other components of our strategy by making acquisitions of and working with partners that add to our competitive advantage in the life science market Continue to actively seek out and evaluate new partnerships, acquisitions, collaborations and investment opportunities that support our strategy and leverage our competitive advantage Entered into a number of new collaborations and continued to explore acquisition and collaboration opportunities Supplement organic growth through acquisitions and partnerships Continue to strengthen relationships for future deals Our KPIs We measure our performance against a number of KPI targets. Success against these KPIs forms a component of the Executive Directors’ and senior management’s incentives. RabMAb® primary antibodies CER revenue growth Strategic alignment: 1, 2, 4, 5 25% FY 2017 FY 2017 target FY 2016 FY 2015 FY 2014 25% 18%-22% revised in March 2017 to 23%–27% 29.5% 24.2% 17.1% How we performed At a constant exchange rate (CER) growth rate of 25.2%, our RabMAb® revenues, despite increasing the target in March 2017, have again outperformed our high expectations in the year. Non-primary antibody products CER revenue growth Strategic alignment: 2, 5 16% FY 2017 FY 2017 target FY 2016 FY 2015 FY 2014 16% 20%–25% 30.3% 28.2% 34.3%
Adjusted EBITDA Operating Profit Consolidated income statement Consolidated earnings before interest, tax, depreciation, amortisation and adjusting income items noted above Provides management with an approximation of cash generation from operational activities after removing the distortion of large/unusual items or transactions that are not reflective of the routine business operations Constant Exchange rate (CER) CER is achieved by applying the prior year’s actual exchange rates to the current year’s results Allows management to identify the relative performance of the business by removing the impact of currency movements which are outside of management’s control Free Cash Flow (FCF) Cash flow from operating activities Cash flow statement Free cash flow is the cash generated from operating activities less non acquisition-related capital expenditure Provides management with an indication of the amount of cash available for discretionary investing or financing after removing the distortion of large/ unusual expenditures that are not reflective of the routine business operations. The tables below show a reconciliation between the alternative measures and the related IFRS measures for financial performance and cash flows for the last two years. Reconciliation of Adjusted income/(expense) measures FY 2017 Adjusted income measure £000 (costs)/income £000 Incremental costs associated with the systems and improvements £000 R&D tax credit relating to prior year £000 Reported IFRS measure £000 Revenue Cost of sales 217,098 (64,998) - - - - - - 217,098 (64,998) Gross profit 152,100 - - - 152,100 Administration and management expenses Research and development expenses (73,440) (14,182) (523) (4,383) (4,436) - - - (78,399) (18,565) Operating profit Operating profit margin* (%) Finance income/(expense) 64,478 29.7% 137 (4,906) 2.3% (3,399) (4,436) 2.0% - - - 55,136 25.4% (3,262)