Final Results

RNS Number : 9215G

Venn Life Sciences Holdings PLC

13 June 2013

 



Venn Life Sciences Holdings Plc

("Venn" or the "Company" or the "Group")

Final results for the year ended 31 December 2012

Venn Life Sciences (AIM: VENN), a growing Clinical Research Organisation (CRO) providing clinical trial management and resourcing solutions to pharmaceutical, biotechnology and medical device clients, announces its audited final results for the year ended 31 December 2012.

Information on the accounts

Prior to completion of the reverse acquisition of Venn Life Sciences by Armscote Investment Company Plc ("Armscote") on 14 December 2012, the board of Venn undertook a group re-organisation, which resulted in the cessation or streamlining of a number of operating entities. As a result the reported financial results below only include within them the entities acquired by Armscote. 

The results for 2012 are further complicated by the reverse accounting requirements associated with the acquisition. The Balance Sheet as at 31 December 2012 reflects the combined Armscote and Venn entities and the Comprehensive Income Statement for the year to 31 December 2012 includes full year results for the acquired Venn entities plus Armscote financials from 14 December 2012 to 31 December 2012.

Highlights

·    Reverse takeover of Armscote, Admission to trading on AIM and Placing which raised £2.5m at 30p

·    Revenue from continuing operations: €2.68m

·    EBITDA before exceptional items: €0.53m loss

·    Loss before tax: €1.15m

·    Loss per ordinary shares: €0.12

·    Cash and cash equivalents: €2.90m

Post period end operational highlights

·    Investment in operations team and expansion into Russia & UK, in preparation for growth

·    Acquisition opportunities identified and currently under consideration

·    Launch of new innovation division, InnoVenn, to focus on significant co-development opportunities

Tony Richardson, Chief Executive Officer, commenting on Outlook, said:

"There are three key areas on which we must deliver during 2013 and beyond.  The first is investing in the existing business base and delivering significant organic growth. The second is through the active pursuit of an acquisition strategy to help accelerate the growth of the business; and the third is through the establishment of a new co-development division, called InnoVenn, an initiative through which I believe we can deliver some exponential value for shareholders."

Enquiries:

Venn Life Sciences Holdings Plc
David Evans, Chairman	Tel: [phone]
Tony Richardson, Chief Executive Officer	Tel: [phone]
Paul Foulger, Finance Director	Tel: [phone]
Zeus Capital (Nominated Adviser and Broker)
Ross Andrews/Andrew Jones(Corporate Finance)	Tel: [phone]
John Goold (Institutional Sales)	Tel: [phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul Cornelius	Mob: [phone]
Lianne Cawthorne	Mob: [phone]

Chairman's Statement

Dear Fellow Shareholder,

On the 14 December 2012, the combination of Armscote Investment Company PLC ("Armscote") and certain trading subsidiaries of Venn Life Sciences ("Venn") was completed, and the shares of the company were formally admitted to trading on AIM. In advance of admission, I was asked to lead a newly constructed board, a challenge I was delighted to take up.

Venn is committed to growing its business organically and through acquisition. The admission to AIM and the associated investor support represents an exciting opportunity and provides the ideal platform on which management can execute its strategy. 

I have outlined below the key areas for development in the business.

Core business & organic growth

The financial results to December are reflective of the small business base that existed at that point. Venn ended 2012 with clinical operations in three main locations, Netherlands, France and Switzerland.  Key to the delivery of organic growth is the development of additional locations and capabilities and it is pleasing to note that since the year-end the Company has added offices in Russia and the United Kingdom. As part of the fundraising process on Admission, we communicated to investors that we would invest in business development and strengthen our operations team with seasoned industry recruits. These investments should underpin both the existing business and provide the operational capability to handle acquired businesses. In April 2013, we announced some key appointments to the senior management team and they have been provided with the necessary investment in the areas of business development and operations infrastructure.

Acquisitions

Acquisitions represent a key growth opportunity for Venn; principally we are looking for opportunities in Europe that bring complementary geographies and services. To deliver meaningful value for shareholders it is critical that we transact at appropriate multiples of revenue and profitability. Management has laid down what it believes to be reasonable parameters within which it makes sense to transact and is developing a pipeline of opportunities both from existing contacts and through engagement with a specialist M&A advisory group. Management has identified a number of acquisition opportunities that meet its criteria and which are currently under consideration.

Innovation

During pre-admission presentations and in our Admission document, we highlighted to investors the opportunity to deliver enhanced shareholder value through the exploitation of Venn's capabilities and network in generating opportunities to participate in the upside associated with the successful development and delivery of new medical technologies, particularly in the medical device arena.  It is important to stress to shareholders that we are not investing core capital, or indeed raising capital for the purposes of investment in this area. 

To capitalise on this opportunity we have developed and launched InnoVenn, a separate innovation division within the Venn Group. InnoVenn will engage in opportunities where technologies are advanced in their development, where we can clearly add significant value, where the commercial opportunity has been assessed with reasonable certainty and where we believe the upside to be significant for Venn. There are a number of propositions being explored, some opportunistic, some a function of our network and some being co-development opportunities with new and existing clients.

Overall the market admission to AIM and capital funding underpins the next phase in Venn's development. The board is committed to delivering shareholder value through the development and growth of the core CRO business, and additional value through smart participation in successful technologies.

David Evans

Chairman

13 June 2013

Chief Executive's Review

Group Structure and Acquired Entities

Prior to completion of the reverse acquisition of Venn Life Sciences by Armscote Investment Company Plc on 14 December 2012, the board of Venn undertook a group re-organisation. The objectives of the re-organisation were to simplify the Group structure, reduce administrative and compliance burdens and focus on the entities and jurisdictions with the highest concentration of activity.  The Netherlands was selected as the Group's centre of clinical operations and oversight and the UK as the centre for corporate activity. This re-organisation resulted in the cessation of an entity in Switzerland and a streamlining of a number of operating entities in France. The resulting impact of this re-organisation on Group results for 2012 is that not all Venn entities that were operating during 2012 are included in the annual report, only the ones acquired by Armscote, therefore the reported P&L performance reflects a lower level of sales and activity than actually occurred. 

With effect from the date of Admission, all business contracts and activities were moved from ceased entities into Venn Netherlands, thus from that date forward reported financial performance will include the results for all areas of activity.

The results for 2012 are further complicated by the reverse accounting requirements associated with the acquisition. The Balance Sheet as at 31 December 2012 reflects the combined Armscote and Venn entities and the Comprehensive Income Statement for the year to 31 December 2012 includes full year results for the acquired Venn entities plus Armscote financials from 14th December 2012 to 31 December 2012.

Results and Commentary

Revenues from the acquired Venn entities amounted to €2.68m for the year (2011: €3.44m) with an EBITDA, before exceptional items, loss for the year of €0.53m (2011: loss of €0.83m). There were exceptional costs of €0.55m, principally transaction and related costs, resulting in an overall loss before tax for the year of €1.15m (2011: profit €1.24m). It is worth noting that the 2011 results include a €2.11m exceptional gain, being an intercompany write-back relating to the corporate restructuring.

Our principal operating cost is personnel; during 2012 we had an average of 55 employees. A critical driver of profitability in our industry is the proportion of billable to non-billable resources in the company. During 2012, our non-billable headcount was 30%+ which is considered high by industry standards but reflects the development stage that Venn is at. A key objective and profit driver for 2013 is to reduce this proportion to below 20%; this will principally be achieved through the recruitment of additional billable clinical resources to satisfy new business wins. The administrative and support base is now fully complete to deal with the current business, new business and acquisition activity.

The consolidated balance sheet as at 31 December 2012 had total assets of €4.4m, €2.9m of which was represented by cash and cash equivalents.

Plans and Outlook

Our primary motivation for listing our shares was to secure what I believe to be the ideal platform on which to grow a business in our sector. The transparency, strong governance and regulation associated with a public listing, gives clients a high level of confidence to award business to Venn. Access to capital will provide the means to secure some growth through acquisition and the public profile will allow us to showcase our business.

There are key areas on which we must deliver during 2013 and beyond.  The first is investing in the existing business base and delivering significant organic growth. We committed to investing a portion of new capital in organic activities - business development, key hires, operating infrastructure and some expansion of the existing geographic footprint. In the first months of 2013 I believe we have made progress in all of these areas. We have bolstered the operations team, broadened the footprint into Russia and the UK, invested in business development hires and activities and readied the organisation for growth.

We have communicated to shareholders our belief that the completion of one or more acquisitions would help accelerate the growth of the business. To this end, we are actively pursuing an acquisition strategy. We have profiled ideal targets, established transaction parameters and engaged with live opportunities. To supplement our efforts we have engaged with a specialist M&A advisory group to help ensure that we can secure what we regard as "value" transactions.

Finally I am excited about the launch of InnoVenn, an initiative through which I believe we can deliver some exponential value for shareholders.

Anthony Richardson

Chief Executive Officer

13 June 2013

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

		2012		2011
	Notes	€'000		€'000
Continuing operations
Revenue	2	2,680		3,439
Administrative expenses	3	(3,804)		(2,192)
Operating (loss)/profit		(1,124)		1,247
Depreciation and amortisation		(43)		(31)
Exceptional items	3	(556)		2,109
EBITDA before exceptional items	2	(525)		(831)
Finance income	4	3		5
Finance costs	4	(29)		(15)
(Loss)/profit before income tax		(1,150)		1,237
Income tax charge	5	(22)		(26)
(Loss)/profit for the year		(1,172)		1,211
Total comprehensive (loss)/income for the year		(1,172)		1,211
(Loss)/earnings per ordinary share	6	€		€
Basic and diluted		(0.12)		0.13

Consolidated Statement of Financial Position

As at 31 December 2012

				2012	2011
			Notes	€'000	€'000
Assets
Non-current assets
Property, plant and equipment				47	91
Intangible assets			7	836	836
Investments				31	-
Total non-current assets				914	927
Current assets
Trade and other receivables				593	1,026
Income tax recoverable				14	21
Cash and cash equivalents				2,876	112
Total current assets				3,483	1,159
Total assets				4,397	2,086
Equity attributable to owners
Share capital				102	2
Share premium account				3,431	-
Group re-organisation reserve				(541)	(541)
Reverse acquisition reserve				45	-
Retained earnings				(508)	664
Total equity				2,529	125
Liabilities
Non-current liabilities
Borrowings				297	-
Total non-current liabilities				297	-
Current liabilities
Trade and other payables				1,212	1,672
Deferred taxation				6	8
Borrowings				353	281
Total current liabilities				1,571	1,961
Total liabilities				1,868	1,961
Total equity and liabilities				4,397	2,086

Consolidated Statement of Cash Flows

For the year ended 31 December 2012

		2012	2011
	Notes	€'000	€'000
Cash Flow from operating activities
Cash (used in)/generated by operations	8	(793)	1,151
Interest paid		(29)	(15)
Income tax paid		(17)	(49)
Net cash (used in)/generated by operating activities		(839)	1,087
Cash flow from investing activities
Acquisition of subsidiaries, net of cash acquired		436	-
Purchase of property, plant and equipment (PPE)		(18)	(77)
Proceeds from sale of PPE		5	-
Proceeds from sale of investments		31	-
Interest received		3	5
Net cash generated by/(used in) investing activities		457	(72)
Cash flow from financing activities
Proceeds from issuance of ordinary shares		2,777	-
New bank loans		381	-
Repayments on borrowings		(19)	(1,551)
Net cash generated by/(used in) financing activities		3,139	(1,551)
Net increase/(decrease) in cash and cash equivalents		2,757	(536)
Cash and cash equivalents at beginning of year		(169)	367
Cash and cash equivalents at end of year		2,588	(169)

Consolidated Statement of Changes in Shareholders' Equity

	Share capital	Share premium	Group re-organisation reserve	Reverse acquisition reserve	Retained earnings	Total
	€'000	€'000	€'000	€'000	€'000	€'000
At 1 January 2011	2	-	(541)	-	(547)	(1,086)
Changes in equity for the year ended 31 December 2011
Total comprehensive profit for the year	-	-	-	-	1,211	1,211
At 31 December 2011	2	-	(541)	-	664	125
Changes in equity for the year ended 31 December 2012
Total comprehensive loss for the year	-	-	-	-	(1,172)	(1,172)
Share capital and share premium as recognised as reverse acquisition (note 9)	90	664	-	45	-	799
Proceeds from share issue (net of expenses)	10	2,767	-	-	-	2,777
At 31 December 2012	102	3,431	(541)	45	(508)	2,529

Notes to the final results

1. Basis of preparation

Venn Life Sciences Holdings Plc is a company incorporated in England and Wales. The Company is a public limited company listed on the AIM market of the London Stock Exchange. The address of the registered office is 14 Kinnerton Place South, London, SW1X 8EH.

This preliminary announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2012 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 13 June 2013.  The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.  Statutory accounts for 2011 which were of the parent company only have been delivered to the Registrar of Companies and those for 2012 will be delivered before the Companies House deadline. The auditors' reports on the statutory accounts for the years ended 31 December 2011 and 31 December 2012 were unqualified and do not contain statements under s498(2) or (3) Companies Act 2006.

2011 consolidated comparative figures have been presented after group re-organisation of Venn Life Sciences Limited, the Irish intermediate holding company, and its subsidiaries. The Group re-organisation of common control transaction is scoped out under IFRS 3. The results of the Group and all of its subsidiary undertakings affected by the group re-organisation are accounted using merger accounting method. The method of accounting for such business combination is treated to take place before the transition of IFRS. The investment is recorded at the nominal value of the shares issued, together with the fair value of any additional consideration paid. Merged subsidiary undertakings are treated as if they had always been a member of the Group. This treatment is permitted under the exemption in IFRS 1 to not restate acquisitions before transition. The corresponding figures for the previous period include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company as consideration as if they had always been in issue. Any difference between the nominal value of the shares acquired by the Company and those issued by the company to acquire them is taken to reserves as re-organisation reserve.          

Additionally the acquisition of Venn Life Sciences Limited and it subsidiaries by Venn Life Sciences Holdings Plc (formerly known as Armscote Investment Company Plc) on 14 December 2012 has been accounted using the principles of reverse acquisition accounting. Although the Group financial statements have been prepared in the name of the legal parent, Venn Life Sciences Holdings Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary, Venn Life Sciences Limited. Under the reverse accounting method, the assets and liabilities of the legal subsidiary, Venn Life Sciences Limited, are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Venn Life Sciences Limited immediately before the business combination and the results of the period from 1 January 2012 to the date of the business combination are those of Venn Life Sciences Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, Venn Life Sciences Holdings Plc, including the equity instruments issued in order to effect the business combination.

This financial information has been prepared in accordance with the Group's accounting policies as disclosed in the financial statements for the year ended 31 December 2011 and International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company will publish its full financial statements for the year ended 31 December 2012 by 13 June 2013, which will be available on the Company's website at www.vennlifesciences.com and at the Company's registered office at 14 Kinnerton Place South, London SW1X 8EH.  The Annual General Meeting will be held on Wednesday 23 July 2013.

2. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Board and the monthly management reports are used by the Group to make strategic decisions and allocate resources.

The principal activity of the Group is that of a Clinical Research Organisation (CRO) providing a suite of consulting and clinical trial services to pharmaceutical, biotechnology and medical device organisations.  This activity takes place across various countries, including France, Netherlands, United Kingdom, Ireland, and Russia and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that given the recent acquisitions, all segments should be maintained and reported, given the potential future growth of the segments.

The reportable segments derive their revenue primarily from the Group's principal activity.

Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA.

The segment information provided to the Board for the reportable segments for the year ended 31 December 2012 is as follows:

2012	France	Netherlands	Other	Total
	€'000	€'000	€'000	€'000
Income statement
External revenue	1,621	1,059	-	2,680
Adjusted EBITDA*	(87)	148	(586)	(525)
Exceptional costs	(74)	(13)	(469)	(556)
EBITDA	(161)	135	(1,055)	(1,081)
Depreciation	(6)	(17)	(20)	(43)
Operating profit/(loss)	(167)	118	(1,075)	(1,124)
Net finance costs	(3)	3	(26)	(26)
Income tax	-	(22)	-	(22)
Retained profit/(loss)	(170)	99	(1,101)	(1,172)
Segment assets
Operating assets	1,151	595	266	2,012
Inter segment assets	(141)	(233)	(117)	(491)
External operating assets	1,010	362	149	1,521
Cash and cash equivalents	-	106	2,770	2,876
Total assets	1,010	468	2,919	4,397
Segment liabilities
Operating liabilities	554	178	977	1,709
Inter segment liabilities	(117)	-	(374)	(491)
External operating liabilities	437	178	603	1,218
Borrowings	90	-	560	650
Total liabilities	527	178	1,163	1,868
Other segmental information
Non current assets - PPE	7	21	19	47
Non current assets - Intangibles	731	105	-	836

2011	France	Netherlands	Other	Total
	€'000	€'000	€'000	€'000
Income statement
External revenue	2,380	1,021	38	3,439
Adjusted EBITDA*	(127)	142	(846)	(831)
Exceptional costs	-	-	2,109	2,109
EBITDA	(127)	142	1,263	1,278
Depreciation	(10)	(9)	(12)	(31)
Operating profit/(loss)	(137)	133	1,251	1,247
Net finance costs	-	5	(15)	(10)
Income tax	-	(26)	-	(26)
Retained profit/(loss)	(137)	112	1,236	1,211
Segment assets
Operating assets	1,277	560	169	2,006
Inter segment assets	(3)	(29)	-	(32)
External operating assets	1,274	531	169	1,974
Cash and cash equivalents	58	53	1	112
Total assets	1,332	584	170	2,086
Segment liabilities
Operating liabilities	658	186	868	1,712
Inter segment liabilities	(29)	(3)	-	(32)
External operating liabilities	629	183	868	1,680
Borrowings	-	-	281	281
Total liabilities	629	183	1,149	1,961
Other segmental information
Non current assets - PPE	13	32	46	91
Non current assets - Intangibles	731	105	-	836

* Adjusted EBITDA excludes exceptional costs.

Other primarily relates to the holding company and head office costs.

No revenues have been derived from a single external customer in 2012 and 2011.

3. Exceptional items

Included within Administrative expenses are exceptional items as shown below:

                                                                                                                                                                                    2012           2011
                                                                                                                                                               Note          €'000          €'000

Exceptional items includes:

- Transaction costs relating to business combinations and listing                                              a             306                   -

- Deemed reverse acquisition costs                                                                                                      b             326                   -

- Inter-company balances written back                                                                                                c             (76)       (2,109)

Total exceptional items                                                                                                                                            556       (2,109)

(a) Transaction costs relating to business combinations.

      The Group incurred acquisition expenses of €306,000 (2011 - €Nil) associated with the acquisitions of subsidiaries which are included within administrative expenses in the consolidated income statement.

(b) Deemed reverse acquisition costs is made up of the excess amount payable on the deemed acquisition consideration of the legal parent company over its fair net assets at the date of acquisition. Details are disclosed on note 9.

(c)  Inter-company balances written back relate to balances owed to the old Group of Venn Life Sciences Limited.

4. Finance income and costs

                                                                                                                                                                                    2012           2011
                                                                                                                                                                                   €'000          €'000

Interest expense:                                    

- Bank borrowings                                                                                                                                                      23               14

- Interest on other loans                                                                                                                                              6                  1

Finance costs                                                                                                                                                                 29               15

Finance income                                      

- Interest income on cash and short-term deposits                                                                                               3                  5

Finance income                                                                                                                                                               3                  5

Net finance costs                                                                                                                                                         26               10

5. Income tax expense

                                                                                                                                                                                    2012           2011
Group                                                                                                                                                                       €'000           €000

Current tax:                                              

Current tax for the year                                                                                                                                              24               28

Total current tax                                                                                                                                                          24               28

Deferred tax:                                            

Origination and reversal of temporary differences                                                                                                                 (2)               (2)

Total deferred tax                                                                                                                                                       (2)               (2)

Income tax charge                                                                                                                                                       22               26

The tax on the Group's results before tax differs from the theoretical amount that would arise using the standard tax rate applicable to the profits of the consolidated entities as follows:

                                                                                                                                                                                    2012           2011
                                                                                                                                                                                   €'000          €'000

(Loss)/profits before tax                                                                                                                                   (1,150)          1,237

Tax calculated at domestic tax rates applicable to UK standard rate of tax of 21% (2011: 21%)                             (242)             260

Tax effects of:                                          

- Expenses not deductible for tax purposes                                                                                                        112                  5

- Losses carried forward/(utilised)                                                                                                                       135          (114)

- Impact of different tax rates in other jurisdictions                                                                                          17          (125)

Tax charge                                                                                                                                                                     22               26

There are no tax effects on the items in the statement of comprehensive income.

6. (Loss)/earnings per share

(a) Basic                                               

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

                                                                                                                                                                              2012             2011
                                                                                                                                                                            €'000            €'000

(Loss)/profit attributable to equity holders of the Company                                                               (1,172)            1,211

Weighted average number of Ordinary Shares in issue                                                               10,116,393    9,600,000

Basic (loss) per share                                                                                                                                   (€0.12)             €0.13

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares. No share options or warrants outstanding at 31 December 2012 or 31 December 2011 were dilutive and all such potential ordinary shares are therefore excluded from the weighted average number of ordinary shares for the purposes of calculating diluted earnings per share.

7. Intangible fixed assets

	Goodwill €'000
Cost
At 1 January 2011 and 31 December 2011	836

At 1 January 2012 and 31 December 2012	836

No amortisation charge has been charged on the goodwill in the income statement.

Goodwill is allocated to the Group's cash-generating units (CGU's) identified according to geographic operating segment. An operating segment-level summary of the goodwill allocation is presented below.

                                                                                                                                                                                    2012           2011
                                                                                                                                                                                   €'000          €'000

France                                                                                                                                                                          731             731

Netherlands                                                                                                                                                                105             105

Total                                                                                                                                                                             836             836

Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2012 was assessed on the basis of value in use. As this exceeded carrying value no impairment loss was recognised.

The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and initial budgets approved by management for the next year were used and forecasts for three further years, followed by an extrapolation of expected cash flows  at a constant growth rate of each unit. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the cash-generating units.

The key assumptions used for value in use calculations in 2012 are as follows:

                                                                                                                                                                    France            Netherlands                                                                                                                                                                                                          %                                %

Longer-term growth rate (after 2016)                                                                                                            3                                3

Discount rate                                                                                                                                                   20                              20

The French cash generating unit has been a loss making unit for the last 2 years. The Directors have made significant estimates on future revenues and EBITDA growth over the next three years based on the Group's budgeted investment in recruiting key employees and marketing the services.

The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the projected results of the French cash-generating unit. The projections and associated headroom used for the unit is sensitive to the EBITDA growth assumptions that have been applied. A 50% reduction in EBITDA growth; in the first five years of the management projections would result in an impairment of €242,000.

8. Cash used in operations

                                                                                                                                                                                  Group         Group                   
                                                                                                                                                                                    2012           2011
                                                                                                                                                                                   €'000          €'000

(Loss)/profit before income tax                                                                                                                       (1,150)          1,237

Adjustments for:

- Depreciation                                                                                                                                                              43               31

- Deemed reverse acquisition costs                                                                                                                     326                   -

- Loss on disposal of PPE                                                                                                                                           14                  1

- Net finance costs / (income)                                                                                                                                   26               10

Changes in working capital

- Trade and other receivables                                                                                                                                488          1,478

- Trade and other payables                                                                                                                                  (540)       (1,606)

Net cash (used in)/generated by operations                                                                                                    (793)          1,151

In the statement of cash flows, proceeds from the sale of property, plant and equipment comprise:

                                                                                                                                                                                    2012           2011
Group                                                                                                                                                                       €'000          €'000

Net book amount                                                                                                                                                         19                  1

Loss on disposal of property, plant and equipment                                                                                          (14)               (1)

Proceeds from disposal of property, plant and equipment                                                                                  5                   -

Non-cash transactions

The principal non-cash transactions relate to the issue of shares as consideration for the acquisition discussed in note 9.

9.         Business Combinations - Reverse acquisition

Reverse acquisition of Venn Life Science Limited and its subsidiaries

On 14 December 2012, Venn Life Sciences Holdings Plc (formerly known as Armscote Investment Company Plc) acquired Venn Life Sciences Limited for a total consideration of €3.54m (£2.88m) satisfied by the issue of 9,600,000 Ordinary shares of €0.00123(0.1p) at €0.369 (30p) per share.

In the consolidated Group accounts the transaction has been accounted for as a reverse acquisition in accordance with the principle of IFRS3. The legal subsidiary is identified as the acquirer, and the fair value of the consideration deemed is €0.8m. The legal parent is identified as the subsidiary. Therefore no goodwill has arisen. The aggregate deemed fair value of the consideration paid, assets and liabilities acquired and resulting charge to the income statement in respect of the above acquisition is detailed below:

	€'000
Consideration at 14 December 2012
Deemed cost of acquisition	799
Total deemed consideration	799
Acquisition-related costs (included in administrative expenses in the consolidated income statement for the year ended 31 December 2012) (note 3)	306
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	436
Investments	62
Trade and other receivables	55
Trade and other payables	(80)
Total identifiable net assets	473
Deemed reverse acquisition costs	326

10.    Annual Report & Accounts

Copies of the audited Annual Report & Accounts for the year ended 31 December 2012 will be posted to shareholders on 13 June 2013 and may also be obtained from the Company's registered office at 14 Kinnerton Place South, London, SW1X 8EH.

 

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