Renovo

notes to the financial statements 19–27

19. Share-based payment reserve

 

 

Group
£’000

Company
£’000

At 1 October 2007

1,777

1,777

Charge for the year

1,468

1,468

At 1 October 2008

3,245

3,245

Charge for the year

485

485

AT 30 SEPTEMBER 2009

3,730

3,730

20. Other reserve

 

 

Group

£’000

At 1 October 2007

22,666

AT 1 OCTOBER 2008 AND 30 SEPTEMBER 2009

22,666

The other reserve arises on consolidation subsequent to the acquisition on 27 April 2005 and is not distributable.

21. Retained earnings

 

 

Group
£’000

Company
£’000

At 1 October 2007

(53,628)

1,476

Loss on disposal of treasury shares

(462)

(462)

Net (loss)/profit for the year

(13,371)

4,582

At 1 October 2008

(67,461)

5,596

Net (loss)/profit for the year

(17,143)

1,861

AT 30 SEPTEMBER 2009

(84,604)

7,457

22. Notes to the cash flow statement

 

 

 

Group

 

Company

2009

£’000

2008

£’000

 

 

2009

£’000

2008

£’000

Operating loss

(22,792)

(21,735)

 

(734)

(428)

Depreciation charges

792

482

 

—

—

Deferred income recognised as revenue

(2,653)

(3,598)

 

—

—

Deferred grants released

(223)

(86)

 

—

—

Share-based payment expense

485

1,468

 

—

—

Operating cash flows before movements in working capital

(24,391)

(23,469)

 

(734)

(428)

Decrease/(increase) in receivables

2,021

(1,784)

 

(20,346)

(10,972)

(Decrease)/increase in payables

(1,938)

2,930

 

128

(10,148)

Net cash utilised by operations

(24,308)

(22,323)

 

(20,952)

(21,548)

Grants received

—

1,495

 

—

—

Research and development tax credits recovered

3,333

2,554

 

—

—

Net cash outflow from operating activities

(20,975)

(18,274)

 

(20,952)

(21,548)

FINANCING ACTIVITIES

 

 

 

 

 

Proceeds on exercise of share options

2

32

 

2

32

NET CASH FROM FINANCING ACTIVITIES

2

32

 

2

32

23. Contractual liabilities

At 30 September 2009 the Group had entered into contracts with third parties for the delivery of drug development and external clinical trials amounting to £8.0 million (2008: £4.1 million) over an anticipated period of two years.

24. Operating lease arrangements

 

 

2009

£’000

2008

£’000

Minimum lease payments under operating leases recognised as an expense for the year

879

504

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 

 

2009

£’000

2008

£’000

EXPIRY DATE

 

 

Within one year

940

995

In the second to fifth years inclusive

2,748

3,719

After five years

—

523

 

3,688

5,237

Operating lease payments represent rentals payable by the Group for certain of its office properties. Certain leases are due to terminate on 31 October 2010 while last year the Group entered into a new 15-year lease pertaining to the University CTF building which may be determined on 5 May 2014.

25. Share-based payments

Equity-settled share option plans

Details of outstanding share options over ordinary shares are shown below. The share options granted by Renovo Limited were rolled over into options over ordinary shares in Renovo Group plc during the year ended 30 September 2005 when Renovo Group plc became the holding Company of the Renovo Group. Renovo Limited is a wholly owned subsidiary of Renovo Group plc. The schemes are as follows:

The Renovo Limited Company Share Option Plan (CSOP)

20% of options granted were exercisable upon Admission to the London Stock Exchange, 40% became exercisable on 12 April 2007 and the remaining 40% vested on 12 April 2008. No further awards will be made under this scheme. At 30 September 2009, options over 2,816 shares had vested but had not been exercised.

The Renovo Group plc Executive Share Option Plan (ESOP)

Options may be granted to eligible employees as selected by the Remuneration Committee. The Company does not currently intend to grant options under this plan to Executive Directors. Normally, options may only be exercised after three years and within ten years of their initial date of grant and then to the extent only that performance criteria are met.

The Renovo Long-term Incentive Plan (LTIP)

The LTIP was adopted by the Company upon Admission and is designed to be a discretionary LTIP. The LTIP is administered by the Board of Directors acting on the recommendation of the Remuneration Committee.

Awards are only available to Executive Directors and members of the senior management team. Under the LTIP two main types of awards can be made:

(a)    Performance share awards – a participant receives shares or a nil cost option at the end of a performance         period (typically three years) provided stretchingperformance targets (set by the Remuneration Committee)         have been reached and the participant is still in employment.
(b)    Co-investment awards – a “Bonus Share Award” may be made by reference to the participant’s             performance over the preceding financial year and will comprise of either shares or a Nil cost option. The         participant will be entitled to receive the shares or exercise the option after three years. Where a Bonus             Share Award is made, it may be accompanied by a “Matching Share Award”.

Summary

Details of the share options outstanding during the year are as follows:

 

 

 

 

 

 

2009

 

2008

 

 

Number
 of share
options

Weighted
average
exercise
 price
£

 

 

 

 

 

 

 

Number
of share
options

Weighted
average
exercise
price
 £

Outstanding at beginning of the year

12,303,284

0.21707

 

9,608,810

0.16668

Granted during the year

855,074

Nil

 

8,345,752

0.12027

Non-vesting/lapsed during the year

(1,228,350)

0.78683

 

(354,137)

Nil

Forfeited during the year

(1,771,111)

0.11066

 

(498,484)

0.24104

Exercised during the year

(264,308)

0.00642

 

(4,798,657)

0.00435

Outstanding at the end of the year

9,894,589

 

 

12,303,284

 

The options outstanding at 30 September 2009 had a weighted average exercise price of £0.14506 (2008: £0.21707) and a weighted average remaining contractual life of 7.99 years (2008: 8.68 years). The range of exercise prices on those options is £Nil to £1.8333. The total number of options that had vested, but had not been exercised, at 30 September 2009 was 1,145,291 (2008: 969,696) with a weighted average exercise price of £0.00010 (2008: £0.00191).

In the year to 30 September 2009, options were granted on the following dates:

 

 

Scheme

 

Date of
grant

 

Options
granted

Exercise
price
£

LTIP

1 February 2009

300,000

Nil

LTIP

26 September 2009

844,074

Nil

The aggregate of the estimated fair values of the options granted on those dates is £0.16 million.

The inputs into the Black-Scholes model are as follows:

 

2009

2008

Weighted average share price (£)

0.36301

0.37225

Weighted average exercise price (£)

0.11640

0.14635

Expected volatility (%)

60

60

Expected life (years)

2–8

2–8

Risk-free rate (%)

4.33–5.23

4.33–5.23

Expected dividends

Nil

Nil

Expected volatility was determined by reference to the Company’s share price movements since flotation and by reference to historic volatility of comparator companies in the European Biotechnology sector. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Management also assesses the probability of the LTIP and ESOP performance criteria being met to be 75% and 95% respectively.

The Group recognised total expenses of £485,075 (2008: £1,467,959) related to equity-settled share-based payment transactions.

26. Retirement benefit schemes

The Group operates a defined contribution retirement benefit scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in funds under control of trustees.

The total cost charged to income of £609,044 (2008: £606,514) represents contributions payable to the scheme by the Group at rates specified in the rules of the plan. At the balance sheet date all contributions in respect of the current reporting period had been paid over to the scheme.

27. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

Trading transactions

During the year there were no sales or purchases of goods between the members of the Group. Amounts outstanding at the balance sheet date relate primarily to the movement of cash and cash equivalents:

 

 

 

 

Amounts owed

by related parties

2009

£’000

2008

£’000

Renovo Limited

(31,371)

(10,972)

Renovo Technologies Limited

—

—

Renovo Limited and Renovo Technologies Limited are related parties of the Group because Renovo Group plc owns the entire issued share capital of both companies.

The amounts outstanding are unsecured and will be settled in cash. Renovo Group plc has confirmed its continuing support to Renovo Limited for the foreseeable future. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Remuneration of key personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration Report.

 

 

2009

£’000

2008

£’000

Short-term employee benefits

1,258

1,836

Post-employment benefits

185

213

Other long-term benefits

—

—

Termination benefits

—

—

Share-based payments

642

1,199

 

2,085

3,248
Directors’ transactions

There were no transactions with key management personnel requiring to be disclosed under Schedule 6 of the Act or IAS 24.