Stallergenes Greer plc. Condensed Consolidated Interim Financial Statements to June 2016

Transcription

1 Stallergenes Greer plc Condensed Consolidated Interim Financial Statements to June 2016

2 INTERIM REPORT 2016 CONTENTS Group Overview 3 Statement of Responsibility 7 Independent Auditors Report 8 Financial Statements 10 Notes to the Financial Statements 15 Appendices 26 2

3 Introduction Stallergenes Greer plc ("the Company"), together with its subsidiaries form the Stallergenes Greer plc Group ("the Group"). This Group was formed over the course of 2015 with the acquisition of Stallergenes Greer Inc. and Finares Holding AG on 12 May 2015 and the merger with Stallergenes SA on 8 September The results of these entities are included in our consolidated results only from the date of the merger. In order to give our shareholders and other key stakeholders a more complete view of our comparative performance for the first six months of 2015 compared with the current period, an unaudited consolidated pro-forma income statement is included as an appendix to these interim accounts. This unaudited consolidated pro-forma income statement has been prepared as if the acquisition of the Greer Group and the merger with the Stallergenes Group were completed on 1 January These pro-forma financial results are unaudited and do not represent the Group s statutory financial results. Operational highlights Total net sales of 78.0 million ( 2015 reported net sales 12.7 million or pro-forma million), representing a decrease of 58 per cent compared to pro-forma 2015 sales. U.S. sales of 44.8 million, ( 2015 reported net sales 11.6 million or pro-forma 40.8 million) representing an increase of 9.8 per cent compared to pro-forma 2015 sales. Operating loss was 58.5 million compared to a reported operating loss of 8.1 million for the first half of The pro-forma EBIT result at June 2015 was a profit of 43.0 million. Operational review and overview of the activities of the Group Production and distribution During the first half of 2016, the Group s primary focus has been the resumption of production and distribution at its Antony site and working diligently to address the observations and recommendations made by the French National Agency for Medicines and Health Products Safety ("ANSM"). The Group was able to address the comments in a short time frame and resumed production and distribution operations in February Since the resumption of production and distribution activities, the Group has gradually ramped up the production of its major product lines. However, the Group s net sales in the first half of the year have been significantly impacted by the lack of production and distribution during the months of January and February and decreased demand generation during subsequent months through to June Nevertheless, continuing our work in the upgrade of our quality systems and release processes will further accelerate the ramp up through the remainder of the year. Other operational activities We have seen strong performance of the extract business in the U.S. due to a combination of favourable price conditions and volume growth. Our strategy to invest in ORALAIR resulted in increased market share and increased patient experience. The overall tablet market remains below expectations due to slower growth than forecasted. The Group continues with a phase III clinical trial for allergic rhinitis against house dust mites with results not expected before 2018, while ACTAIR was launched in Australia on 26 July Our European and International group companies made significant efforts to reduce their cost base mainly through containment of external spend and natural attrition, but also through targeted reorganisation in the sales and marketing functions. 3

4 Financial review Net sales Net sales were 78.0 million for the period, significantly below the net sales of million on an unaudited proforma basis for the first half of This was due to the temporary suspension of production and distribution at our Antony site in late 2015 through to early Since that date there has been a gradual ramp-up of production and distribution during the second quarter of 2016, but we partially missed the start of prescription seasons in certain countries for seasonal allergy immunotherapy treatments which further impacted performance during the period. On a statutory basis, the comparative net sales were 12.7 million to 2015 which represent the sales made by Stallergenes Greer Inc. from acquisition on 12 May to the Net sales by geographic segment Interim accounts 2016 Unaudited Pro-forma financial statements 2015 Reported accounts 2015 m m m Southern Europe North & Central Europe International markets US Total Net sales in the U.S. totalled 44.8 million for the period, representing a strong performance in this region. On an unaudited pro-forma basis, sales increased by 9.8 per cent or 4.0 million during the period from 40.8 million for the same period in On a reported basis the U.S. recorded 11.6 million net sales up to June It is anticipated that U.S. sales will continue to grow throughout the year. Southern European net sales totalled 17.8 million for the period, which is significantly lower than anticipated due to the impact of the temporary suspension and subsequent gradual return of production and distribution, which predominantly affected this region. On an unaudited pro-forma basis, net sales decreased by 81.4 million or 82.1 per cent from 99.2 million during the same period last year. On a reported basis, Southern Europe sales were 0.6 million for the same period in North & Central Europe and International net sales totalled 10.7 million and 4.7 million respectively, both of which are below expectation due to the temporary suspension. It is anticipated that the results in Southern, North and Central Europe will continue to improve after the region was impacted by the suspension of production and distribution at the end of Net sales by product type Interim accounts 2016 Unaudited Pro-forma financial statements 2015 Reported accounts 2015 m m m Sublingual Subcutaneous Other Veterinary Total The products marketed by the Group are split into four categories: sublingual products, subcutaneous products, veterinary products and other products. 4

5 The sublingual product category includes STALORAL sublingual liquid solution as well as ORALAIR and ACTAIR tablet sales. Sublingual sales decreased by 94.6 million or 77.6 per cent to 27.3 million during the period on an unaudited pro-forma basis against the same period in 2015 but increased 27.2 million on a reported basis. This category is the product category most impacted by the temporary suspension. ORALAIR performed well in all regions with market share in the U.S. increasing from 9.0 per cent to 16.0 per cent during the period. In order to improve the adoption of ORALAIR in the U.S., we continue to make significant investment in our commercial footprint and the results of this additional investment are being carefully monitored Subcutaneous sales include our products ALUSTAL and PHOSTAL. Sales were below last year as production had not fully resumed in the EU following the suspension of production and distribution. Sales totalled 34.2 million to 30 June 2016 representing a decrease of 21.0 per cent or 9.1 million from 43.3 million on an unaudited pro-forma basis in the first half of On a reported basis, sales increased by 24.9 million or per cent. Veterinary sales performance in the U.S. totalled 5.4 million for the period and was not impacted by the temporary suspension. On an unaudited pro-forma basis, net sales increased 0.3 million or 5.9 per cent from 5.1 million of sales over the same period in On a reported basis, sales increased by 3.8 million or per cent. This remains a growth area for the Group. Other sales include diagnostics as well as ancillary products, totalling 11.1 million for the period, representing a decrease of 2.3 million or 17.2 per cent from 13.4 million on an unaudited pro-forma basis to June On a reported basis, sales increased by 9.4 million or per cent. Current operating result The current operating loss of 58.5 million for the period reflects the significant reduction in net sales compared with the unaudited pro-forma operating profit of 43.0 million in the first half of Reported operating loss for the first half year in 2015 is 8.1 million. Our operating margin loss of 73 per cent was significantly impacted by the temporary suspension, particularly as certain operating costs did not decrease during this period. The actions taken by technical operations to ensure we were able to resume production and distribution of our products, has resulted in some costs not reducing in line with our sales performance. There have also been additional costs relating to the set-up of the new global organisational structure. In the first half of 2015, the operating margin on an unaudited pro-forma basis was 29.0 per cent. Net assets and net cash position At 2016, the net assets of the Group were million (31 December 2015: million). As at 2016, the Group had "cash and cash equivalents" of 84.9 million. In addition, the Group has limited external debt with an outstanding debt balance of 15.6 million. This has resulted in a net cash position of 69.3 million. 5

6 Contents Statement of Directors responsibilities... 7 Independent review report to Stallergenes Greer plc FINANCIAL STATEMENTS Consolidated balance sheet as at Consolidated income statement for the period ended Consolidated statement of other comprehensive income for the period ended Consolidated statement of changes in equity Consolidated cash flow statement NOTES TO THE FINANCIAL STATEMENTS Basis of preparation Going concern Changes in accounting policies and disclosures Critical accounting estimates and judgements Critical accounting estimates and judgements (continued) Financial risk management Capital management Segment reporting Segment reporting (continued) Subsequent events NOTES TO THE BALANCE SHEET Property, plant and equipment for the period ended Inventories for the period ended Cash and borrowings for the period ended Other current liabilities for the period ended NOTES TO THE INCOME STATEMENT Transformation costs for the period ended Income tax expense Loss per share OTHER NOTES Related parties Dividends APPENDICES Unaudited consolidated pro-forma income statement for the period ended

7 Responsibilities for the financial statements Statement of Directors responsibilities The directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR and DTR 4.2.8, namely: an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report. The directors of Stallergenes Greer plc are listed in the Stallergenes Greer plc Annual Report for 31 December 2015, with the exception of the following changes in the period: Mrs Yvonne Schlaeppi, Mr Elmar Schnee and Mr Rodolfo Bogni were appointed on 9 June By order of the Board Fereydoun Firouz 23 rd August 2016 Chairman and Chief Executive Officer Peter Buhler 23 rd August 2016 Chief Financial Officer 7

8 Independent review report to Stallergenes Greer plc Report on the condensed consolidated interim financial statements Our conclusion We have reviewed Stallergenes Greer plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report of Stallergenes Greer plc for the 6 month period ended Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. What we have reviewed The interim financial statements comprise: the consolidated balance sheet as at 2016; the consolidated income statement and consolidated statement of other comprehensive income for the period then ended; the consolidated cash flow statement for the period then ended; the consolidated statement of changes in equity for the period then ended; and the explanatory notes to the interim financial statements. The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. As disclosed in note 2.1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Responsibilities for the interim financial statements and the review Our responsibilities and those of the directors The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority. Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 8

9 What a review of interim financial statements involves We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements. PricewaterhouseCoopers LLP Chartered Accountants Cambridge August

10 1. FINANCIAL STATEMENTS 1.1 Consolidated balance sheet as at 2016 thousands Note December 2015 Goodwill 207, ,844 Other intangible assets 93, ,716 Property, plant and equipment ,049 78,059 Non-current financial assets 17,827 19,835 Deferred tax assets 23,456 4,447 Non-current assets 421, ,901 Inventories ,193 59,362 Trade receivables 32,311 29,669 Current financial asset 49 2 Other current assets 15,741 14,034 Income tax receivable 12,204 17,608 Cash and cash equivalents , ,183 Current assets 204, ,858 Total assets 625, ,759 thousands Note December 2015 Share capital 19,788 19,788 Share premium Merger and contribution premium 342, ,904 Revaluation reserve (829) (1,158) Retained earnings 132, ,908 Total shareholders equity 493, ,981 Provision for employee retirement obligations and related benefits 6,857 5,333 Non-current provisions Deferred tax liabilities 23,842 25,692 Non-current liabilities 31,645 31,783 Trade payables 24,450 27,612 Current provisions 3,902 4,922 Current financial liabilities 15,558 17,669 Income tax payable 716 1,549 Other current liabilities ,025 62,243 Current liabilities 100, ,995 Total equity and liabilities 625, ,759 The notes included in Sections 2 to 5 are an integral part of these interim condensed consolidated financial statements. 10

11 1.2 Consolidated income statement for the period ended 2016 thousands Note * Net sales ,018 12,746 Other revenue 93 Total revenues 78,111 12,746 Cost of goods sold (43,378) (5,114) Gross margin 34,733 7,632 Distribution costs (7,625) (1,158) Selling and marketing expenses (31,364) (2,419) Administrative expenses (29,857) (4,783) Other general expenses (2,503) (62) Selling, general and administrative expenses (71,349) (8,422) Loss before R&D (36,616) (790) Research and development costs (R&D) (25,072) (723) R&D-related income 4,612 Net R&D costs (20,460) (723) Operating loss before transformation costs (57,076) (1,513) Transformation costs 4.1 (1,465) (6,621) Operating loss (58,541) (8,134) Financial income 44 Financial expenses (284) (71) Net financial expense (240) (71) Loss before tax and associates (58,781) (8,205) Income tax , Share of loss from associated companies (92) Loss for the period (39,029) (7,650) *The result to 2015 includes all Stallergenes Greer plc costs and from the 12 th May, they also include the results of Stallergenes Greer Inc. and Finares AG. All the activities were in respect of continuing operations. The basic loss and diluted loss per share for the six months to June 2016 was 197 cents (the six months to June 2015: loss 208 cents) (Note 4.3) 11

12 1.3 Consolidated statement of other comprehensive income for the period ended 2016 thousands Consolidated net loss for the period (39,029) (7,650) Translation adjustment (5,582) 1,161 Change in value of available for sale financial assets (1,940) Impact of change on deferred tax 668 Total items liable to be reclassified to the income statement (6,854) 1,161 Actuarial gains and losses (625) Impact of change on deferred tax 215 Total items not liable to be reclassified to the income statement (410) Gains and losses directly taken to equity (7,264) 1,161 Consolidated comprehensive loss (46,293) (6,489) 12

13 1.4 Consolidated statement of changes in equity For the period 1 January 2016 to 2016 Share Share Merger Revaluation Retained Shareholder's thousands Capital Premium Premium reserve Earnings equity At 1 January , ,904 (1,158) 176, ,981 Amendment (1,755) 1, Consolidated net loss for the period (39,029) (39,029) Other comprehensive loss for the period (1,272) (5,992) (7,264) Consolidated comprehensive loss (1,272) (45,021) (46,293) Treasury shares transactions (244) (244) Share-based payments At , ,149 (829) 132, ,691 For the period 1 January 2015 to 2015 thousands Share Capital Share Premium Merger Premium Revaluation reserve Retained Earnings Shareholder's equity 1 January (57) 18 Consolidated net loss for the period (7,650) (7,650) Other comprehensive income for the period 1,161 1,161 Consolidated comprehensive loss (6,489) (6,489) Issue of shares 5,658 (541,167) 546,825) Share premium reduction (541,167) 541,167 ) Loan write off to reserves 556) 556) Impact of combinations under common control (273,372) (273,372) At , , ,538) 13

14 1.5 Consolidated cash flow statement thousands Notes Cash flow from operating activities Operating loss 1.2 (58,541) (8,134) Amortisation and depreciation charges 12,786 1,778 Change in provisions (12) Share-based payments 247 Capital losses from disposal of assets 401 Financial losses excluding interests 40 Income tax paid 4,898 Change in working capital of operating activities (9,397) 9,064 Change in deferred income (338) Net cash (outflow)/inflow from operating activities (49,916) 2,708 Cash flow from investing activities Net financial interest received 3 Purchase of non-current assets (8,712) (577) Cash acquired on combinations under common control 8,730 Proceeds from sale of non-current assets 591 Change in working capital of investment activities (4,477) Net cash (outflow)/inflow from investing activities (12,595) 8,153 Free cash flow after investing activities (62,511) 10,861 Cash flow from financing activities Treasury shares purchases (243) Net financial interest paid (284) (71) Repayment of bank overdrafts (371) Repayment of borrowings (1,435) (626) Proceeds from borrowings 37 Net cash (outflow) from financing activities (2,296) (697) Change in cash and cash equivalents (64,807) 10,164 + Cash and cash equivalents opening balance 150, /+ effect of translation adjustment on foreign currency - denominated cash (434) 38 = Cash and cash equivalents closing balance ,942 10,260 14

15 2. NOTES TO THE FINANCIAL STATEMENTS The Stallergenes Greer plc Group ( Stallergenes Greer or the Group ) is dedicated to the diagnosis and treatment of allergies. The Group provides a comprehensive approach to allergic diseases, offering allergy specialists a wide range of products, from diagnosis to sublingual and subcutaneous allergen immunotherapy medicines, the only long-term allergy treatment to rebalance the immune system. The parent company, Stallergenes Greer plc, is a public limited company, listed on compartment B of the Euronext Paris Stock Exchange. It is incorporated and domiciled in the UK. Its registered office is located in London at 40 Bernard Street, London, WC1N 1LE. The interim condensed consolidated financial statements at 2016 were approved by the Board of Directors on 23 August These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act Statutory accounts for the year ended 31 December 2015 were approved by the board of directors on 26 April 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act These interim condensed consolidated financial statements have been reviewed, not audited. 2.1 Basis of preparation The interim condensed consolidated financial statements for the six months ended 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting as published by the International Accounting Standards Board ( IASB ) and adopted by the European Union ( EU ). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements as at 31 December They are expressed in Euros ( ) and rounded to the nearest thousand. The interim condensed consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with International Financial Reporting Standard ( IFRS ) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note Going concern Since the suspension in December 2015 and the re-start of partial production and distribution in February 2016, sales to June remain significantly below the same period in 2015 and this has resulted in a cash reduction. The Directors have reviewed and continue to review sales and cost forecasts for the coming years and they believe that cash will be reduced further in the second half of the year, but at a lower rate since the beginning of 2016 as sales improve. The directors envisage this trading recovery to continue in 2017 and beyond which will deliver a significantly improved operating result. Taking into account the Group s cash flow projections, an assessment of principal risks and the financing and other options available should they be required, the directors have a reasonable expectation that the Group has the adequate resources to pursue its operations for at least twelve months from the date of approval of the financial statements. The directors consider it appropriate to adopt the going concern basis of accounting in preparing the condensed consolidated interim financial statements. 15

16 2.3 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year except as described below; A number of amendments to IFRSs became effective for the financial year beginning on January , however the Group did not have to change its accounting policies or make material retrospective adjustments as a result of adopting these new standards. The amendments to IFRS effective for periods beginning on 1 January 2016 are as follows: Annual improvements (Amends IFRS 5, IFRS 7, IAS 19, IAS 34) Amendments to IFRS 11 Accounting for acquisitions of interests in joint ventures Amendment to IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortisation Amendments to IAS 16 and IAS 41 Agriculture: Bearer plants Amendments to IAS 27 Equity method in separate financial statements Amendments to IAS 1 Disclosure initiative Amendments to IFRS 10, IFRS 12 and IAS 28 Investment entities: Applying the consolidation principle (not yet EU endorsed as of 1 May 2016) Principal risks and uncertainties Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties for the remaining six months of the financial year are in line with the Group s risk profile analysis on pages 24 to 27 of our Annual Report for the year ended 31 December 2015 and are available from the Stallergenes Greer plc website. As a result of the recent UK referendum to leave the European Union, the Board is reviewing and considering the potential implications that could affect the Group. There are numerous uncertainties at this current time and we continue to monitor further developments. 2.4 Critical accounting estimates and judgements The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these interim condensed consolidated financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015, with the exception of changes in estimates that are required in determining the provision for income taxes. 16

17 2.4 Critical accounting estimates and judgements (continued) Determination of fair value The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 by inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); or Level 3 by inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). The fair value of trade receivables, other current assets, cash and cash equivalents, trade payables, financial liabilities and other current liabilities approximate their carrying amount. The following table presents the group s financial assets and liabilities that are measured at fair value at thousands Level 1 Level 2 Level 3 Total Cash and cash equivalents 6,897 6,897 Loans and receivables Financial assets available-for-sale 15,132 15,132 Financial assets 22,029 22,029 Bank overdraft Bank borrowings Financial liabilities The following table presents the group s financial assets and liabilities that are measured at fair value at 31 December thousands Level 1 Level 2 Level 3 Total Cash and cash equivalents 6,897 6,897 Loans and receivables Financial assets available-for-sale 17,073 17,073 Financial assets 23,970 23,970 Bank overdraft Bank borrowings Financial liabilities There were no transfers between Levels during the period. There were no changes in valuation techniques during the periods. 17

18 2.5 Financial risk management Market risks The foreign exchange risk to the Group is not considered significant even though it makes sales in several foreign currencies as the income and the expenses are mainly denominated in Euros and U.S. Dollars. In 2015, the currency split was unusual due to the date of acquisitions and merger in the period and also due to the temporary suspension and product recall in France. It is anticipated that as sales normalise a much greater proportion of the Group s income and expenditure will be in Euros. Therefore, the Group will be able to match a significant portion of it income against expenditure. In the first half of 2016, 35.0 per cent of the Group s sales were denominated in Euros and 61.0 per cent in U.S. Dollars in the period and 58.0 per cent of the Group expenses were denominated in Euros and 38.0 per cent in U.S. Dollars. 4.0 per cent of income and 4.0 per cent of expenses were incurred in a mix of other foreign currencies. The Group regularly reviews its foreign exchange risk and hedging instruments are used when the risk is considered significant and specifically when the foreign exchange markets are particularly volatile. Net foreign exchange gains for the period were recognised as Other general expenses and totalled 247k (2015: 2k). No foreign exchange risk hedging derivatives were left unwound at Credit risk The credit risk on trade receivables primarily concerns hospitals and distributors. These are long-term partners and no significant default has been noted over the past 10 years. Any significant delay in payment is subject to corrective action and, if applicable, provisions are recognised by the sales department. The credit risk on financial deposits is managed by only dealing with first-rate banking institutions Interest rate and liquidity risk As at 2016, the Group s interest bearing debt totalled 15,558k (31 December 2015: 17,699k). A change in the interest rate level by one percentage point would consequently equal a change of interest expense in the period by 107k (2015: 122k). The interest rate exposure is not currently hedged but this will be reviewed as required. 2.6 Capital management 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 shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets and reduce debt. At 2016, the Group had very limited external debt with an external loan of 15,558k (31 December 2015: 17,298k) and no overdraft (31 December 2015: 371k). Therefore at June 2016 this totals 15,558k (31 December 2015: 17,699k). The Group s cash and cash equivalents are 84,942k (31 December 2015: 150,183k). As a result of the cash reduction the Group is now considering suitable financing options. 18

19 2.7 Segment reporting Stallergenes Greer plc operates a single business activity of allergy immunotherapy. The Group s Chief Operating Decision Maker ( CODM ) is considered to be the Chairman and Chief Executive Officer ( CEO ) as well as the Executive Committee ( EC ) which corresponds to the Group s management organisation. The Group operates under a matrix structure whereby individual members of the EC are responsible for geographic segments of the Group s total allergy immunotherapy business. In assessing the Group performance, the CODM and the EC review the financial information on an integrated basis for the Group as a whole, substantially on the same basis as the Group s IFRS Financial Statements. Resources are allocated on a Group-wide basis according to need. In particular, commercial spend, capital expenditures and R&D resources are allocated based on the overall Group priorities and strategic choice. As a result, there is a single operating segment as defined under IFRS 8. Revenues for this operating segment are analysed into four product lines and four geographic regions as disclosed below. Sales were as follows, by product line: thousands 2016 % 2015 % Sublingual route 27, Subcutaneous route 34, , Other products 11, , Veterinary 5, , Net sales 78, , The products marketed by the Group are split into four categories: (i) the sublingual products, (ii) the subcutaneous products, (iv) other products, and (iv) veterinary products. (i) (ii) The sublingual products represent the core product line of the Group and currently offer two forms of treatment: liquid sublingual (drops placed under the tongue, STALORAL ) and solid sublingual (rapidly dissolving tablets placed under the tongue, ORALAIR ). In 2016, net sales for this product line are lower than anticipated due to the impact of the product recall. In order to better respond to the needs of each patient, the Group also offers a range of subcutaneous allergen extracts including allergen extracts from the Greer Group, allergen extracts absorbed by calcium phosphate with PHOSTAL, or by aluminium hydroxide with ALUSTAL, as well as the hymenoptera venom range with ALYOSTAL venom and ALBEY, the recommended treatments for hymenoptera venom allergies (the allergy immunotherapy is a particularly effective treatment for hymenoptera venom allergies, which can be life-threatening). (iii) The Group also proposes skin testing devices enabling the identification of the allergen or allergens responsible for the allergy, sterile diluents and sterile empty vials, syringes, and other compendial products. (iv) The Group proposes products and services to veterinary dermatologists and reference laboratories on the U.S. market, and to non-u.s. distributors. Bulk extracts represent the majority of sales to these customers; however, ancillary products such as sterile empty vials are also sold. The Group also offers Enzyme-linked Immunosorbent Assay ( ELISA ) components and prescription services. 19

20 2.7 Segment reporting (continued) The Group does not have any significant customers accounting for more than 5% of Group sales. Sales analysed by geographic region: thousands 2016 % 2015 % Southern Europe (1) 17, Northern & Central Europe (2) 10, International markets 4, United States 44, , Net sales 78, , (1) Portugal, Spain, France, Italy Including Greece and Switzerland 2.8 Subsequent events No other material event had occurred after the balance sheet date at the date the 2016 interim condensed consolidated financial statements were approved by the Board of Directors on 23 August

21 3. NOTES TO THE BALANCE SHEET 3.1 Property, plant and equipment for the period ended thousands Land and buildings Fixtures and fittings Machinery and equipment Other tangible assets Tangible assets in progress Total tangible assets Gross value at 31 December ,559 6,922 59,108 43,085 13, ,227 Additions 42 2, ,701 7,726 Disposals and other decreases (30) (25) (108) (163) Transfers (53) 53 Translation adjustment (171) (2) (251) (85) (65) (574) Gross value at ,430 6,867 61,015 43,823 18, ,216 Accumulated depreciation and impairment at 31 December 2015 (8,734) (1,606) (39,859) (27,969) (78,168) Depreciation expenses (516) (185) (3,387) (2,083) (6,171) Disposals Translation adjustment Accumulated depreciation and impairment at 2016 (9,237) (1,791) (43,127) (30,012) (84,167) Net value at 31 December ,825 5,316 19,249 15,116 13,553 78,059 Net value at ,193 5,076 17,888 13,811 18,081 79,049 21

22 3.1 Property, plant and equipment for the period ended 2016 (continued) 2015 thousands Land and buildings Fixtures and fittings Machinery and equipment Other tangible assets Advance and down payment on tangible assets Tangible assets in progress Total tangible assets Gross value at 31 December 2014 Addition on acquisition of subsidiary 6, ,547 1, ,281 18,821 Additions Translation adjustment Gross value at , ,598 1, ,867 19,503 Accumulated depreciation and impairment at 31 December 2014 Depreciation expenses (31) (299) (84) (10) (424) Translation adjustment (1) (17) (3) (21) Accumulated depreciation and impairment at 2015 (32) (316) (87) (10) (445) Net value at 31 December 2014 Net value at , ,282 1, ,867 19,058 Property, plant and equipment does not include any leased assets. There were no impairment charges included in 2016 or

23 3.2 Inventories for the period ended 2016 thousands Raw materials Merchandise In progress Finished goods Total inventories Net value at 31 December ,623 5,732 14,045 11,962 59,362 Net value at ,242 4,706 12,688 12,557 59,193 Inventory write-offs in the period amounted to 3,514k (2015: 5,000k) relating primarily to expired products. 3.3 Cash and borrowings for the period ended 2016 thousands More than five years One to five years Less than one year 30 June December 2015 Cash equivalents 1,240 1,240 29,237 Cash 83,702 83, ,946 Cash and cash equivalents (A) 84,942 84, ,183 Bank overdrafts 371 Borrowings 15,558 15,558 17,298 Total borrowings (B) 15,558 15,558 17,669 NET CASH POSITION (A) (B) 69,384 69, , Other current liabilities for the period ended 2016 thousands 30 June December 2015 Fixed asset payables 1,071 5,500 Provision for recall 24,466 24,736 Social security taxes payable 19,733 20,157 Other taxes payable 4,017 4,026 Deferred income and accrued expenses (1) 6,738 7,824 Total 56,025 62,243 (1) Deferred income only relates to the deferred revenues of the Shionogi contract milestone instalments. The provision for recall of 24,466k (2015: 24,736k) reflects management s best estimate of the product re-call initiated in December 2015, arising as a direct result of the temporary suspension of production and distribution at the Antony site. The provision is calculated based on the volume of returns received from customers and certain key assumptions around the legal and contractual obligation that the Company may have to its customers who have returned products. The Group continues to process and assess the returns received and negotiations with customers are also on going. The uncertainty will only be resolved as negotiations with customers are completed. It is anticipated that this uncertainty will be resolved during the second half of 2016 and the provision utilised. 23

24 4. NOTES TO THE INCOME STATEMENT 4.1 Transformation costs for the period ended 2016 Transformation costs are analysed as follows: thousands Total transformation costs (1,465) (6,621) The transformation costs of 6,621k in the income statement mainly reflect the costs of the merger transaction with Stallergenes SA incurred during the period 1 January 2015 to This cost includes legal, tax, accounting advice and other professional fees associated with the transaction. The transformation costs of 1,465k in the income statement for the period ending June reflect employee termination costs and associated consultancy, tax and legal advice costs. 4.2 Income tax expense Income tax expense is recognised based on management s estimate of the weighted average annual income tax rate expected for the full financial year. The income tax in these accounts represents an evaluation of every entity. As we expect to return to profitability in future years, the deferred tax asset relates to expected utilisation of the loss incurred to date. 4.3 Loss per share A calculation of basic earnings per share has been based on the following loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding: Loss after tax in 000 (39,029) (7,650) Weighted average number of ordinary shares outstanding 19,787,553 3,677,231 Basic and diluted loss per share in cents (197c) (208c) The weighted average number of ordinary shares outstanding comprises the ordinary shares in issue less the weighted average number of shares held in treasury during the year. The basic and diluted loss per share is based on a loss for the year attributable to equity holders of the parent company. Shares that may be issued under share options and free share plans could potentially dilute earnings per share in the future, but were excluded from the calculated weighted average number of ordinary shares because their effect would have been anti-dilutive. 24

25 5. OTHER NOTES 5.1 Related parties The Group s parent entity Ares Life Sciences I S.a.r.l (incorporated in Luxembourg) owns 83.64% of the Company s shares. The remaining 16.36% of the shares are widely held. The ultimate controlling party of the Group is the Bertarelli family. The following transactions were carried out with related parties: a) During the period, the Company paid 16,662 (2015: 0) under a transitional service agreement to Waypoint Corporate Services Limited, an entity under common control, of which 100,489 was outstanding at 2016 (31 December 2015: 202,833). b) During the period, the Group paid 284,898 and 272,417 ( 2015: 43,500 and 88,790) under support services agreements to Bemido SA and Waypoint Corporate Services INC respectively. Amounts of 289,442 and 4,423 were outstanding at At 31 December 2015 the amounts of 148,500 and 29,904 were outstanding to Bemido SA and Waypoint. c) During the period, no further payments were made or due to Ares Life Sciences Fund Management Limited (30 June 2015: 1,794k), an entity under common control. d) During the period, the Group paid 309,625 (2015: 0) to Ares Life Sciences S.A., an entity under common control, for the secondment of staff. At 2016 there is an outstanding amount of 124,351. There was no amount outstanding at 31 December Dividends No dividends have been paid or proposed during the period 25

26 APPENDICES Basis of preparation The interim consolidated financial statements for the six months ended 2016 have been prepared in accordance with IFRS as adopted by the European Union. Accordingly, this unaudited pro-forma income statement has been prepared in accordance with IFRS. They are expressed in Euros ( ) and rounded to the nearest 0.1 million. On the 12 th May 2015, Ares Allergy Holdings plc ( AAH ) acquired the businesses of Stallergenes Greer Holdings Inc. and Finares Holdings AG and subsequently merged with Stallergenes SA on 8 September The Group has chosen to account for the acquisition and merger as transactions under common control and, therefore, the consolidation uses the predecessor values of each entity as of the date of the acquisition and merger. No fair values have been ascribed to any assets and liabilities being acquired or contributed. The unaudited pro-forma income statements presented are compiled by taking the individual results of operations of the Stallergenes Greer Holdings Inc. and Finares Holdings AG for the periods ended 2015 and 2016 adjusted for IFRS and any accounting policy differences, less any intra-group eliminations. The individual results of operations of Stallergenes SA Group for the periods ended 2015 and 2016 are then also included less any further adjustments and intra-group eliminations, to form the unaudited pro-forma consolidated income statement. The unaudited consolidated income statement is converted into Euros using the average Euro / U.S. Dollar exchange rate for the period, respectively. 26

27 Unaudited consolidated pro-forma income statement for the period ended 2016 millions Note IFRS 2016 IFRS Pro Forma 2015 Net sales Other revenue Total revenues Cost of goods sold (43.4) (5.1) (41.6) (46.7) Gross margin Distribution costs (7.6) (1.1) (8.0) (9.1) Selling and marketing expenses (31.4) (2.4) (35.6) (38.0) Administrative expenses (29.8) (4.8) (21.4) (26.2) Other general expenses (2.5) (0.1) (0.7) (0.8) Selling, general and administrative expenses (71.3) (8.4) (65.7) (74.1) Loss/(profit) before R&D (36.6) (0.8) Research and development costs (R&D) (25.1) (0.7) (24.6) (25.3) R&D-related income Net R&D costs (20.5) (0.7) (8.3) (9.0) Operating loss before transformation costs (57.1) (1.5) Transformation costs 4.1 (1.4) (6.6) (4.4) (11.0) Operating loss (58.5) (8.1) Financial income Financial expenses (0.3) (0.1) (0.4) (0.5) Net financial expense (0.3) (0.1) Loss before tax and associates (58.8) (8.2) Share of loss from associated companies (0.1) (0.1) Income tax (15.2) (14.7) Loss/(profit) for the period (39.0) (7.7) All the activities were in respect of continuing operations. The change in structure is noted in the above income statement 1 and represents the financial performance of Stallergenes Greer Inc. Group from 12 May 2015 to 2015 and the Stallergenes Group from 1 January 2015 to