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Annual Report and Accounts 2008 Concateno plc Annual Report and Accounts 2008 Accounts and Report Annual

Linking it all together

Concateno plc 10 Buckingham Street London WC2N 6DF

T +44 20 7004 2800 F +44 20 7004 2801 E [email protected] www.concateno.com >> Advisers Contents

01 Highlights 26 Statement of Directors’ Responsibilities 02 Group overview – our products and services 27 Independent Auditors’ Report 04 Group overview – our geographical reach 28 Consolidated Income Statement 06 Group overview – the markets we operate in 28 Consolidated Statement of Recognised Income 08 Chairman’s Statement and Expense 10 Chief Executive Officer’s Review 29 Consolidated Balance Sheet 13 Financial Review 30 Consolidated Cash Flow Statement Registered Office Principal Bankers 16 Board of Directors 31 Notes to the Consolidated Financial Statements Concateno plc Barclays Bank plc 17 Financial Statements index 61 Company Balance Sheet 10 Buckingham Street Head Office Branch 18 Directors’ Report 62 Notes to the Company Balance Sheet London 1 Churchill Place 21 Corporate Governance Report 65 Advisers 24 Directors’ Remuneration Report WC2N 6DF London E14 5HP Registered Number 05396234 England and Wales Public Relations Advisers Concateno is a global provider of drug and alcohol testing Financial Dynamics Nominated Adviser and Broker Holborn Gate and related services as well as a manufacturer of clinical Collins Stewart (Europe) Limited 26 Southampton Buildings diagnostic products. 9th Floor London 88 Wood Street WC2A 1PB London Drug and Alcohol abuse is a growing problem in society. EC2V 7QR Company Secretary Rowena Nixon Concateno is at the forefront of this issue, working with Joint Brokers 10 Buckingham Street SingerCapital Markets Limited London governments, employers and healthcare and law One Hanover Street WC2N 6DF professionals to help reduce the impact of this problem. London W1S 1AX Registrars Our expertise is unmatched and our staff are passionate Capita Registrars about working with clients to identify the best possible Evolution Securities Limited The Registry 100 Wood Street 34 Beckenham Road solutions for them. London EC2V 7AN Beckenham Kent Solicitors to the Company BR3 4TU Following the successful integration of our subsidiary Jones Day 21 Tudor Street Patent Agents businesses, Concateno can now provide the optimal type London Marks and Clerk of drug testing in any biological sample. EC4A 0DJ 4220 Nash Court Oxford Business Park South Auditors Oxford OX4 2RU KPMG Audit Plc Building on our expertise in Europe the Company is now 1 Forest Gate poised to both expand geographically and to develop new Brighton Road Crawley market sectors. RH11 9PT

Cozart® DDS: the Group’s leading oral fluid testing device, field proven with police forces and employers internationally. >> Our highlights

Financial highlights Corporate highlights m >> Concateno established as the European £ 47. 5 market leader in the provision of drug and Revenue alcohol testing services (2007: £26.1m) >> £3.3m annualised operational synergies achieved earlier than plan >> International networks of 90 distributors and 500 sample collectors giving the Group a unique global footprint % >> Three specialist UKAS accredited

14 1 Increase in unaudited pro forma revenue laboratories and two state-of-the-art 2008: £47.5m (2007: £41.8m) manufacturing facilities >> Unique ‘one-stop-shop’ offering a high quality service for the management of Drugs of Abuse testing >> Restructuring of the sales and marketing % functions to target ‘vertical’ customer

54 1 2 markets. Successful adoption of model in Increase in unaudited pro forma adjusted EBITDA 2008: £12.3m (2007: £8.0m) the UK now being rolled out internationally >> Winner of the 2008 Queens Award for Enterprise in Innovation >> Renewal of the Home Office ‘Drug Intervention Programme’ contract for up to £4.2m three years Operating profit (2007: £2.0m)

1 Pro forma results (unaudited) are annualised results as if all business combinations were in place on 1 January each year. 2 See EBITDA reconciliation in Financial Review.

Concateno plc Annual Report and Accounts 2008 01 >> Group overview

Our products and services

Concateno is Europe’s most focused drug and alcohol testing facility. This is reflected in: >> The consultative sales and marketing integrated divisional structure, providing expert market knowledge across diverse market sectors. solutions > >> The delivery of products and services from the group’s specialist manufacturers, laboratories and distributors.

Innovations

Concateno’s New Product Development integrates the Company’s unique knowledge specialisms through a rigorously structured and market centred process. New innovations to date include: >> Employee Assistance Programmes Cozart® DDS – Concateno’s offering expert advice and specialist enhanced on-site saliva counselling and support. drug detection system >> Non-invasive S-PMA testing detecting > Used extensively by police forces, drug treatment centres and benzene at or below current health healthcare professionals standards. > Sample collection in less than one minute > Digital analysis of test cartridge >> DDS-U – a rapid urine test with > Multiple printouts of results built-in reader. >> EtG hair test – test detecting the metabolite of alcohol Drug Solids Testing > Used internationally by Customs and produced in the body. Border Control Agencies > Able to detect drugs at parts per million > Results in two minutes

Pro forma revenue growth 2007>2008 13%

Concateno plc 02 Annual Report and Accounts 2008 1 2 Point-of-Care Laboratory testing based

Key features: testing > Used on location > Results in minutes Key features: > Oral fluid and urine matrices for drug testing > All laboratories UKAS accredited to ISO 17025 > Oral fluid and breath testing for alcohol > Capability to test any sample type: > Environmental detection of drugs in powders, tablets, hair, urine, sweat, oral fluid, blood resins, liquids and surfaces > Legally defensible results > Global collections network

Concateno branded urine point of care tests Oral fluid > The only brand used by HM Prison Service > Non invasive sample collection voluntary testing > Testing for recent use > Onsite and laboratory testing Urine > Good indicator of usage over several days > Well established and understood method > Onsite and laboratory testing 3 Hair Laboratory > Non invasive sample collection > Testing for longer term use > Limited opportunity for sample adulteration products

Key features: > Comprehensive range of diagnostic Pro forma revenue tests and reagents to the global clinical Cozart® DDS – Concateno’s growth diagnostics market 2007>2008 > Manufactured at Concateno’s accredited and enhanced on-site saliva purpose built facilities in the UK and Spain drug detection system % > Over 30 years experience of producing clinical > Used extensively by police diagnostic kits forces, drug treatment centres and 13 > Products sold into over 100 countries healthcare professionals > Complementary line of instrumentation > Sample collection in less than one minute > Digital analysis of test cartridge > Multiple printouts of results

Pro forma revenue growth 2007>2008 15%

Concateno plc Annual Report and Accounts 2008 03 >> Group overview

Our geographic reach

Geographic reach Integrating our global services Through its acquisitions, Concateno Our locations has created a wide footprint of offices, Argentina, Australia, Austria, Bahrain, Belgium, Brazil, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, distribution partners and sample Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kuwait, collection officers. These resources Liechtenstein, Luxembourg, Maldives, Mexico, Netherlands, New Zealand, North America, Norway, Pakistan, Peru, Philippines, Poland, are a powerful base from which to grow Portugal, Qatar, Romania, Russia, Serbia, Seychelles, Sierra Leone, revenues rapidly and cost effectively. Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, United Our aim is to replicate the success of Arab Emirates, United Kingdom, United States, Venezuela, Vietnam. our UK business internationally with initial emphasis on our own offices in Scandinavia, Italy and Spain. In addition, we are focused on increasing sales of our POCT products through existing distribution partners particularly in Australia and Europe.

We are also successfully recruiting >>North Africa new local channels for other territories, Served by our local partner building first on our worldwide and long Santé Lab (Algeria) established partners that distribute our laboratory products. >>South America Served by a number of distributors, including Labcenter in Mexico. We have recently hired a local country manager to develop this market further.

> 2008 revenue by geography

UK = £28.3m (2007: £18.2m) Continential Europe = £10.7m (2007: £5.0m) Rest of World = £8.4m (2007: £2.9m) connecting sectors >

Concateno plc 04 Annual Report and Accounts 2008 >>United Kingdom Concateno is the number one supplier in this >>EMEA diverse and growing market. Through its long The business enjoys a strong presence in established contracts with government the Middle East through its contracts with, agencies our experience and credibility in all amongst others, Emirates Airlines. In types of drug and alcohol testing is addition it has developed strong distribution unmatched. Equally, we are the largest and partners in the wider region, for example, most experienced provider of workplace Pera Medikal, an important and growing testing and associated support services. distributor in the Turkish market.

>>Spain >>Australia Our Spanish Manufacturing and Sales Offices Concateno has a strong presence in this has proven expertise in the research and dynamic and pioneering market having worked development of in vitro clinical diagnostic with all State Police Forces to develop the reagents with over 30 years experience of roadside drug testing market. We continue to producing the clinical diagnostic kits with see sales growth as rollout continues, as well products sold into over 100 countries. as diversification into other market sectors.

>>South America Served by a number of distributors, including Labcenter in Mexico. >>Scandinavia >>Italy We have recently hired a local Following integration of all Our office continues to show country manager to develop this our business interests in this strong year-on-year revenue growth. market further. market our local office is Following a change in workplace successfully expanding out legislation we were able to produce of its niche healthcare market a fully compliant product immediately to become the leading player for which early sales and customer Collection facilities in the region. feedback is excellent. Sales offices Distribution offices

Case study >>Ireland: Concateno joins up with the Irish strong deterrent and to identify those abusing drugs. In the last five Defence Forces years we have tested 7,000 personnel and will continue to do so, at home and overseas,’ said Commandant Gavin Young, Defence Forces spokesman. Concateno won a two-year, €60,000 contract with Ireland’s Defence Forces to carry out random drug testing on its troops serving at home The contract also provides Defence Forces with a rapid response and abroad. collection capability: skilled Concateno officers are on call to attend when ‘for cause’ tests are required – even if these are on overseas Detecting drugs of abuse including heroin and crack/cocaine, among postings, such as earlier this year when trained sample collection others, the programme, delivered through Concateno’s specialist officers donned flak jackets on a visit to soldiers stationed in Kosovo. workplace division, will test 10% of the Defence Forces personnel An initial test is made using Concateno’s point-of-care rapid-testing annually. Providing diagnostic equipment, resources and training cups, which allow urine samples to be taken and tested quickly and services to test the troops on site, usually within barracks, is a primary efficiently, offering an immediate indication of a potential positive screening procedure to detect drug abuse. result for drug abuse. The simplicity and speed of the process means troops can be tested with the minimum disruption to their duties. ‘Consumption of illegal drugs is simply incompatible with service life and our random drugs testing programme ensures that we have a

Concateno plc Annual Report and Accounts 2008 05 >> Group overview

The markets we operate in

Our sectors Key drivers for our market include: >> Growing social concern over substance misuse. >> Wider awareness of the link between drug use and crime. >> Increased investment in ‘harm reduction’ and treatment. >> Greater acceptance of workplace drug testing programmes.

Our Opportunity: >> International access to previously unaddressed markets. >> Product innovation and increased R&D. >> Cross selling into existing clients. >> Scale, experience and credibility.

Workplace Maritime

Helping organisations manage Concateno is the largest and the risk that drug and alcohol most experienced provider to misuse can bring by developing the global Maritime industry, Drug and Alcohol policies; running fleet-wide random providing staff and management testing programmes. Its education and training courses; international network of sample supplying Employee Assistance collection officers ensures that Programmes and rehabilitation testing can be carried out in any services; devising optimal port around the globe. testing services.

> realising Pre-employment and in-employment testing. synergies

Concateno plc 06 Annual Report and Accounts 2008 Criminal Justice Laboratory Products Medico-Legal Healthcare

Concateno is the most Concateno develops and Concateno has the most expert The treatment and rehabilitation experienced provider of Drug manufactures a broad range of laboratory devoted to analysis of of individuals affected by Testing services to the UK clinical diagnostic products in hair. Over 4,000 law firms substance misuse is becoming Government through its work liquid reagent and microplate currently use Concateno’s more important for Governments within Her Majesty’s Prison format. It also supplies a range Trichotest along with over 85% and policy makers. Concateno Service and the Home Office of clinical analysers and of UK Police Forces. has developed a full range of Drug Intervention Programme. laboratory instruments available drug and alcohol testing services through a long-established to meet the unique requirements international distribution network of this market. that spans 80 countries.

Concateno plc Annual Report and Accounts 2008 07 >> Chairman’s Statement

£ 47. 5 m

Revenue (2007: £26.1m) 14%

Keith Tozzi 1 Chairman Increase in unaudited pro forma adjusted revenue 2008: £47.5m (2007: £41.8m)

‘Concateno has enhanced its market leading position by substantially increasing revenues and margins whilst maintaining high levels of customer service and retention.’ > looking forward

Concateno plc 08 Annual Report and Accounts 2008 I am delighted to report Concateno’s financial results for the year Market dynamics ended 31 December 2008. Following a series of acquisitions of drugs Each of our markets shows differing dynamics: of abuse testing businesses the previous year, during 2008 we have transformed Concateno from a group of seven separate businesses • Criminal Justice – moderate growth and higher margins in the UK into the integrated European market leader. underpinned by long term government contracts. Encouraging signs of international growth Each constituent acquisition was an expert in its field, whether it be in • Workplace – an expanding pipeline of opportunities and customer the testing of a particular matrix (such as hair or oral fluid), through conversions as regulation and best practice amongst employers is unique networks (such as Spinreact’s distributors or Medscreen’s extended. We have a very low level of exposure to the pre- global collection operation), or technical expertise (such as employment market TrichoTech’s award winning hair testing methodologies, or Cozart’s • Maritime – continued growth in sales aided by new products and state-of-the-art Point-of-Care devices). By integrating these sales. The regulated oil and chemical tanker market in which we businesses, we are now able to offer all this expertise to all our clients. predominantly operate remains robust • Medico-Legal – rapid adoption of hair testing in the UK Courts The success of this strategy in 2008 has been borne out by high system has seen dramatic growth in our business. Exciting customer retention, new contract wins, and growing cross-selling of international opportunities exist in this field in which we are products and services in both the UK and increasingly in world leaders overseas markets. • Healthcare – capped UK budgets have meant only limited growth, albeit with opportunities to develop access to budgets in disease Sales in the year to 31 December 2008 were £47.5m (2007: £26.1m) prevention and the wider health service and earnings before share-based payments, non-recurring items, • Lab Products – Spinreact continues to leverage its niche position interest, tax, depreciation and amortisation (‘EBITDA’) were £12.3m in this large market. There are exciting opportunities in many (2007: £6.2m2). Group profit before interest and tax was £4.2m (2007: developing economies £2.0m) and adjusted basic earnings per share increased to 6.34p Our staff from 5.29p in 2007. Further details are provided in the Financial I would like to thank all our staff for their continued hard work during Review on pages 13 to 15. 2008 and for helping us make Concateno the industry leader in the European Drugs of Abuse testing sector. Operational Leverage We stated at the time of the acquisition of Cozart in October 2007 that Offer update we would seek to achieve annualised operational synergies of £3m by On 8 July 2008, following press speculation, we confirmed that we the end of 2008, and as I confirmed in my Interim report in September had received a number of expressions of interest in Concateno and 2008, we actually achieved total synergies of £3.3m, that are 10% that we had appointed UBS Investment Bank as financial adviser to above our target and earlier than planned. With the integration phase help the Board consider a range of options for enhancing shareholder now effectively complete we are focusing on leveraging operational value, including a possible sale of the Group. Since that time, we have synergies, by servicing existing and new customers through our current been in an ‘Offer Period’. The Company is now at an advanced stage infrastructure. We are investing in our core sales, laboratory and finance in that process and expects to be able to announce its conclusion in business systems and undertaking further procurement reviews. the relative short term. Current Trading and Outlook Our focus is on maximising value from our existing asset base Despite the difficult wider macro-economic environment we have through organic growth and driving international opportunities, been encouraged by the trading performance of the Group in the year extending the model that we have successfully implemented in the to date. We have good visibility over revenues, with approximately half UK to Europe and other territories. Our strategy for international of our sales generated from the public sector and an additional development is fourfold: quarter from highly regulated private sector customers. • to drive organic growth from our existing operations; The Board believes that the Company is successfully delivering on its • to extend the ‘Concateno Model’ into territories where we have a strategy and looks forward to 2009 with confidence. direct presence (such as Sweden and Italy); • to leverage the current ninety distribution relationships and global Annual General Meeting support network that we have around the world to selectively The Annual General Meeting of the Company is to be held on 14 May target specific markets and territories that are ready to develop 2009. The notice convening the AGM accompanies this report. drug testing (i.e. through regulatory change); and • to make selective in-fill acquisitions in international territories to accelerate growth. Keith Tozzi Chairman 30 March 2009

1 Pro forma results (unaudited) are annualised results as if all business combinations were in place on 1 January each year. 2 See EBITDA reconciliation in Financial Review. Case study >>UK: Workplace testing – BBC uses Concateno’s reference data

Over the 2008 August Bank Holiday weekend, six BBC TV and radio programmes referred to Concateno’s workplace drugs and alcohol data for news and commentary. The broadcasts, including the top-rated BBC Radio 5’s Drive, Radio 4’s Today and BBC TV’s Working Lunch programmes, highlighted statistics indicating that drug and alcohol tests in the UK had risen by nearly a fifth in the first half of the year, with employers requesting over 100,000 workplace tests.

As Europe’s largest provider of drug and alcohol testing solutions, conducting over 8 million tests annually, Concateno has the most extensive reference database to draw upon, enabling drug misuse trends to be monitored, helping support employers, government and healthcare leaders in formulating their drug and alcohol policies.

Concateno plc Annual Report and Accounts 2008 09 >> Chief Executive Officer’s Review

£3.3m

Annualised operational synergies achieved earlier than plan 40%

Fiona Begley Chief Executive Officer Sales generated from outside the UK (2007: 30%)

‘Having integrated the businesses in 2008 our focus turns to international growth and leveraging the resources of our UK centres of excellence.’

> enabling growth

Concateno plc 10 Annual Report and Accounts 2008 Restructuring and Margin Improvement • Tender win to provide the NHS with a full range of DoA products At the end of 2007, Concateno consisted of seven separate acquired and services from our expanded portfolio. entities, operating under their own brands and methodologies. During • Roll-out of dried blood spot testing methodology for blood borne 2008 we have integrated those businesses and rolled out a common viruses (‘BBV’) to healthcare clients, particularly in the drug Group wide approach to sales, sample collection, laboratory treatment services where harm reduction is part of their remit. processing, training and quality assurance. BBVs, including Hepatitis C and HIV, are prevalent amongst drug users. Integration • New Workplace contract wins including Defence Forces Ireland, A review of the integration projects and synergies achieved was set First Group, Greater Manchester Police and Irish Rail. Additional out in the 2008 Interim Report and Accounts. A number of sites were contracts in 2009 include Scottish Police, Bovis Lend Lease and rationalised during the year, including: Speedy Hire. • Adoption of Cozart POC devices by HM Revenue & Customs to • migration of the Warrington oral-fluid testing laboratory to help in the fight against drug-trafficking. Abingdon (completed May); • Successful roll-out of testing for benzene, a major carcinogen and • closure of the CPL International site in Liverpool with the migration component of many maritime cargoes, to the Group’s installed of the workflow to Cardiff and Canary Wharf (completed June); maritime client base. • closure of the Paddington office with the migration of the workflow to Canary Wharf (completed July); These contract wins, and others, combined with high customer • closure of the Gothenburg office in Sweden with the migration of retention rates have meant that we have seen year-on-year growth in the workflow to Canary Wharf (completed July); and all vertical sectors during 2008. • closure of the Wakefield office with migration of the workflow to Lab Products Canary Wharf (completed January 2009). Criminal Work- Medico- Health- & Intl £’m Justice place Maritime Legal care distributors Total The result is that we now have three Centres of Excellence in the UK: 2007 (Pro forma) 6.9 4.8 5.9 3.6 10.7 9.9 41.8 • Abingdon – oral-fluid testing, Cozart POC (‘Point-of-Care’) device 2008 7.6 5.5 6.4 5.2 11.0 11.8 47.5 manufacture and R&D. • Cardiff – hair testing. % Change 10% 13% 9% 44% 3% 19% 14% • Canary Wharf – urine testing. Following the successful adoption of the ‘Concateno Model’ in the as well as our laboratory product manufacturing site in Girona, Spain UK, we have started to roll-out the same model across Europe, and sales offices in Stockholm, Barcelona and Rome. offering a comprehensive DoA product and service offering. Initial successes have included: The resulting annualised synergies are £3.3 million. • Roll-out of hair testing to the Spanish market. Sales and Marketing • Rapid Development of a urine variant of the DDS product to meet At the beginning of 2008, we restructured the sales and marketing recent Italian workplace legislation (see below). functions of the various businesses to address ‘vertical’ markets in • Distribution of POC products to Swedish Customs Service. order that the specific needs of customer groups would be better targeted, product and service offerings tailored to their requirements We see growth coming from a number of areas: and best practice rolled out to other clients. This approach has been well received by customers. • Growth in existing markets driven by increased acceptance of regulation, growing prevalence of drug misuse and recognition by Criminal Medico- Lab employers and government bodies of the benefits of structured Justice Workplace Maritime Legal Healthcare Products testing programmes and associated support services. Summary Products Provision of Provision of Hair testing Provision of Supply of • New product and service offerings to current and new customers of product/ and services pre- and fully to support drug-testing reagents service to support in-employment managed court cases services and in the DoA arena (e.g. DDS-U, BBV, Benzene). provided. drug-testing drug testing for drug-testing around family to support analysers to • Expansion into new markets, either through geographical in prisons, regulated and services to law and child non- distributors expansion, or by leveraging off current relationships by offering police safety-critical merchant protection. custodial principally custody industries. vessels. Pre- and court for use by new products and services. suites and in- orders and hospital and at the employment prisoners clinical roadside. hair testing. on probation laboratories. Excellence of Service The Group has focused on ensuring that the highest standards are Example – HM Prison – Laing Fleet Individual Drug Actions – Santé Lab met at all times, illustrated by the fact that our Cardiff laboratory won customers Service, O’Rourke management law firms Teams and (Algeria). – Home – TFL companies, and social Private – Labcenter the Queens Award for Enterprise in Innovation. Quality Assurance Office, – United e.g. V Ships, services Healthcare (South Managers are based at each of our laboratories to ensure that – State of Biscuits and direct to covering both organisations. America) Victoria ship owners private and – Chronolab standards are rigorously applied and all Account Managers have Police worldwide. public cases. Systems been trained on the Group’s products and our expert toxicologists (Spain) ensure that up-to-date advice and results of a consistent standard are given regardless of where our clients are in the world. We have also increased resources in our Customer Services department to ensure Highlights in 2008 included: that customer queries are answered expeditiously and that we are • The renewal of the Drug Intervention Programme (‘DIP’) with the pro-active in anticipating customer needs. Home Office in July 2008, which included upgrading their installed base of Cozart POC devices to the higher margin Cozart® DDS All of our locations are covered by third party accreditation and/ variant. Contracts with the Home Office now have an annual value or certification. of ~£3.4m. ISO 17025 ISO 9001 • Increased uptake of hair-testing in the medico-legal sector. Testing and ISO 13485 Quality TrichoTech, the Group’s hair-testing specialist operation based in Calibration Medical Management Cardiff, is the leader in this field. Hair testing benefits from being Laboratories Devices System able to detect drug misuse in the previous months rather than just Abingdon Yes Yes Yes days and is therefore of particular value in family law. TrichoTech Canary Wharf Yes NA Yes also offers an expert witness statement service. Year-on-year Cardiff Yes NA NA revenue growth in this market sector was more than 40%. Spain NA Yes Yes

Concateno plc Annual Report and Accounts 2008 11 Further developments in 2009 >> Chief Executive Officer’s Review continued Additional work will be undertaken during 2009 to integrate the businesses further including:

• An ongoing procurement review to rationalise our product offering and reduce costs including the development of a centralised warehousing and stock control system. • Integrated ‘New Product Development’ process leveraging innovation and expertise across the wider group; forthcoming products include the next generation of oral fluid sample collector. • Progressing the development of the UK’s information management systems including the Laboratory Information Management Systems (‘LIMS’), Customer Relationship Management tools, and finance systems. • Roll-out of a ‘Training Academy’ to develop our key staff.

We continue to invest in the businesses, with the latest laboratory testing equipment being maintained, so that we can meet the increased demands of our customers, test for a wider range of drugs of abuse and provide more detailed analysis to our clients.

We also continue to develop new products and services. The benzene and EtG tests announced in our last annual report have been successfully rolled out and in 2009 we are supplementing this with an Case study emergency benzene test kit in case of an accident on site or at sea.

>>Concateno and Phillips share a commitment to Following a change in legislation in Italy, we were able to develop a help reduce the impact of drug abuse urine Point-of-Care device to provide a quantifiable reading. We brought this product to market within three months and we are With drug abuse a growing issue in today’s society, Concateno and already seeing encouraging sales in the first quarter of 2009. Philips share a commitment to working with government, employers, healthcare and law professionals to help reduce the impact of this We have a pipeline of new products and services which we are problem. Since 2006 the two organisations have been developing an currently developing and will roll-out over the forthcoming months innovative handheld drugs of abuse detection device. The new and years. solution will be launched to selected customers in 2009 and brings together Concateno’s expertise in the field of immunoassay We also continue to explore ways to make the sample collection development with Philips’ revolutionary ‘Magnotech’ technology. process easier and more efficient. We have rolled-out a training programme to all our collectors around the world and reviewed the ‘The Concateno-Philips drug screening test will be the first product Quality Assurance process to ensure that standards of collection are that features Philips’ Magnotech technology, a new biosensor consistently high and the integrity of the ‘chain-of-custody’ is technology that uses magnetic nanoparticles to measure low maintained. We offer a 24/7 collection service. Our TrichoTech concentrations of target molecules in blood and saliva.’ said Marcel operation is also trialling ‘walk-in centres’ in Liverpool and van Kasteel, VP of Philips and CEO of Philips Handheld Manchester. Immunoassays. ‘This first collaboration is a means of demonstrating the excellence and robustness of the new technology with a company The Group continues to develop the next generation of handheld that is synonymous with road-side testing and is already working drug testing devices in conjunction with Philips, and both companies closely with government departments and police forces. It will be the announced the successful launch of the Magnotech technology at the catalyst for them to grow and expand their European and global Medica conference in Dusseldorf in November 2008. Development markets. Magnotech delivers them a highly accurate result in less and commercialisation of the device is ongoing and launch is due in than two minutes from a saliva sample,’ added Mr. van Kasteel. the second half of 2009.

By understanding and anticipating our customers’ needs and demanding exceptional quality in the products and services that we offer we feel that we are well positioned to benefit from the growing Drugs of Abuse testing market in 2009 and beyond.

Fiona Begley Chief Executive Officer 30 March 2009

Concateno plc 12 Annual Report and Accounts 2008 Overview >> Financial Review Results for the Group are stated for the year ending 31 December 2008 with comparatives for the year ended 2007.

Sales in the year to 31 December 2008 were £47.5m (2007: £26.1m). Earnings before share-based payments, non-recurring items, interest, tax, depreciation and amortisation EBITDA were £12.3m (2007: £6.2m) representing an increase in margin from 23.8% to 25.9%. After charging depreciation of £1.3m (2007: £0.6m) EBITA was £11.0m (2007: £5.6m). Loss after tax for the year was £0.4m (2007: profit of £0.7m) following non-recurring charges in the year of £3.0m (2007: £0.8m) and exceptional finance costs of £1.5m (2007: £nil). A tax credit of £0.2m (2007: credit of £0.3m) was recognised in the year (representing an effective tax rate of 28% for the group).

There were no material acquisitions or disposals during 2008, but a number of acquisitions throughout 2007. In order to aid shareholders’ understanding of year-on-year performance we have included aggregated unaudited pro forma numbers to show how the business would have performed had all the acquisitions occurred on 1 January 2007.

Divisional Performance Year ended 31 December Unaudited 2007 £m 2008 Pro forma1 2007 to 2008 % change Revenue: Laboratory Services 24.1 21.3 2.8 13.1% Point of Care 12.9 11.4 1.5 13.2% Laboratory Products 10.5 9.1 1.4 15.4% Total 47.5 41.8 5.7 13.6% EBITDA: Laboratory Services 9.4 6.3 3.1 49.2% Point of Care 3.8 2.4 1.4 58.3% Laboratory Products 1.3 0.9 0.4 44.4% Neil Elton Central (2.2) (1.6) (0.6) 37.5% Finance Director Total 12.3 8.0 4.3 53.5% Margin 25.8% 19.2% 6.6%

1 Pro forma results (unaudited) are annualised results as if all business combinations were in place on 1 January each year.

‘In 2008 Concateno has combined strong revenue growth and margin improvements with solid cash conversion. The completed integration projects in 2008 will act as a good foundation for further operational leverage in 2009.’ > delivering efficiency

Concateno plc Annual Report and Accounts 2008 13 Like-for-like performance >> Financial Review continued Approximately 63% (2007: 63%) of the Group’s sales are undertaken in Pounds Sterling with the balance of the Group’s sales settled predominantly in US Dollars and Euros. With the depreciation of Pounds Sterling, particularly in the second half of 2008, the results reported by the Group have been affected by the fluctuation in these exchange rates. The table below restates the proforma results for the Group for 2007, based on the exchange rates, experienced during 2008 so that the results for the two years may be compared on a like-for-like basis. The main currencies and rates used are US$1.86:£1, €1.26:£1 and SEK12.10:£1.

Like-for-like Divisional Performance Year ended 31 December 2007 Unaudited Adjusted Adjusted £m 2008 Pro forma1 2007 to 2008 % change Sales 47.5 43.7 3.8 8.8%

Case study Gross Profit 27.5 25.0 2.5 10.0% Margin 57.8% 57.2% 0.6% >>UK Government awards Concateno oral EBITDA 12.3 8.3 4.0 48.6% screening contract Margin 25.8% 18.9% 6.9%

The processing of arrestees in police detention has been improved by 1 Pro forma results (unaudited) are annualised results as if all business combinations using a quicker, simpler testing device. In a two-year, £4.5 million were in place on 1 January each year. Home Office contract awarded in July 2008, Concateno provides police in England and Wales with a new device to detect heroin and This shows that like-for-like proforma revenue growth in 2008 was cocaine/crack in the oral fluid of arrestees. £3.8m (8.8%) compared with reported proforma growth of £5.7m (13.6%) and like-for-like growth in proforma EBITDA was £4.0m The police conduct in the region of 220,000 such tests each year (48.6%) compared with reported growth of £4.3m (53.5%). using Concateno’s drug detection system Cozart® DDS to provide a simple, quick answer; as a result approximately 4,000 drug misusers Because the Group has similar foreign currency payment obligations are referred to treatment every month. Recorded crime figures show as it does foreign currency receipts the Group is reasonably internally that acquisitive crime has fallen by more than a fifth since the hedged to foreign currency fluctuations. The Group does not have any programme started. foreign currency hedges in place, but keeps this under regular review.

As part of the government’s DIP, the tests are a key part of the Interest and tax national strategy for tackling drugs and reducing crime. Currently, in Net finance costs in the year totalled £4.8m (2007: £1.7m). This areas where drug testing is in operation, anyone arrested for trigger included an exceptional finance charge of £1.5m, discussed below. offences such as burglary and robbery is tested to find out if they have taken heroin or cocaine. Those who test positive are required to The effective tax rate for the full year was 27.9%. The comparable attend an assessment of their drug dependency and related needs. underlying tax rate for the prior year was 26.8%.

EPS Basic earnings/(loss) per share (‘EPS’) for the year was (0.43p) (2007: 1.05p), the decrease on 2007 being primarily due to the investment made during the year in restructuring and integration projects (see non-recurring items for more detail below) and an exceptional charge in respect of an interest hedge. Adjusted basic EPS2 for the year was 6.34p (2007: 5.29p), representing a 20% increase.

Cash and financing Net borrowings at 31 December 2008 were £25.7m (2007: £36.0m). These comprised current loans, borrowings and overdrafts of £28.1m (2007: £5.6m), non-current loans and borrowings of £0.3m (2007: £33.7m, including £8.3m Convertible loan which was converted during 2008), cash of £4.3m (2007: £3.9m) and net derivative financial instruments of £1.6m (2007: £0.6m).

All term loan debts are disclosed as current liabilities because the existing term loan that, after unamortised debt issue costs, totalled £24.7m at 31 December 2008 (2007: £28.2m) is due to be repaid in full on 31 December 2009. As at 30 March 2009, the Group has not put in place refinancing beyond the end of 2009. If the Company were not able to refinance the term loan debt before the end of the year, this may result in a going concern risk. The Board has considered this risk but believes that, despite the difficult financial markets, it is in a good position to refinance. The Board is taking the following actions:

Concateno plc 14 Annual Report and Accounts 2008 • It is in discussions with a number of banks whose Credit growth as well as operating cash flow and free cash flow targets (free Committees have agreed in principle to provide re-financing in full cash flow being cash flow after working capital movements, either individually or in partnership. exceptional items, tax and capital expenditure but before interest and • The Group is in advanced stages of negotiation with the banks debt principal repayments). Other financial and operational KPIs used who have undertaken extensive due diligence. by each of the business units are tailored to those entities and include • The Group has demonstrated strong financial performance and revenue forecast ‘gap’ analysis, quote tracking, sample turnaround cash generation and has complied and continues to comply with times and customer feedback. all its covenant obligations. • The Group is comparatively lowly geared at less than two These KPIs are recorded on a regular basis, used within the times EBITDA. businesses throughout the year, and reported to the Board on a monthly basis in order that they can assess the performance of the The Company will look to confirm refinancing as soon as it comes out Group and underlying business units. of the current Offer period and well in advance of the end of 2009.

The current term loan is subject to interest based on one month LIBOR, until 30 June 2009 and three month LIBOR between 1 July and 31 December 2009. The Company has in place an interest rate hedge facility adopted in November 2007 over 75% of the scheduled Neil Elton bank loan balances until December 2014. The effect of the hedge is Finance Director to cap interest rates payable on that portion of the bank debt at 6.5%. 30 March 2009 Should LIBOR fall below 3.73% (LIBOR was 2.05% at 28 February 2009) a strike rate of 5.75% is payable. The net fair value of this 2 Adjusted EPS excludes the after tax impact of intangibles amortisation, £2.6m (2007: £1.6m), non-recurring items, £3.4m (2007: £0.7m) and share-based payments, derivative financial instrument at 31 December 2008 was £1.5m £0.6m (2007: £0.4m). (2007: £0.2m) all of which has been charged to the Income Statement as an exceptional finance charge in 2008 (2007: £0.2m charged to the Reconciliation from Operating Profit to EBITDA hedging reserve). Further details are given in Note 16. Year ended 31 December Unaudited The balance of the loans and borrowings comprise finance lease 2007 commitments of £0.2m (2007: £0.4m) and zero interest-bearing loans 2008 2007 Pro forma £m Note Actual Actual (unaudited) granted to fund R&D in Spain of £0.5m (2007: £0.5m). Operating Profit 4.2 2.0 0.8 The Company issued 10,840,292 ordinary shares during the year. Of Reverse impact of: this 10,587,355 shares were issued in settlement of a Convertible Depreciation 4 1.3 0.6 1.1 Amortisation 4 4.0 2.4 2.7 Loan in November 2008. The original loan of £8.7m was issued at the Non-recurring items 3 3.0 0.8 3.0 time of the acquisition of Cozart in October 2007 and attracted Foreign exchange interest at a rate of 12.5% per annum. gains 4 (0.8) – (0.1) Share-based The balance of shares issued in the year related to the exercise of payments 24 0.6 0.4 0.5 employee share options and settlement of a deferred consideration EBITDA 12.3 6.2 8.0 payment falling due to the former owners of Nemesis Scientific Ltd (acquired by the Cozart group in March 2007).

Non-recurring and exceptional items Non-recurring charges and exceptional items in the year were £4.5m (2007: £0.8m) and comprised:

• Charges related to the integration projects undertaken in 2008 of £1.7m (2007: £0.4m). • A provision for onerous leases on vacated premises of £0.4m (2007: £nil). • Charges related to the impairment of assets of £0.2m (2007: £nil). • Other non-routine professional costs of £0.7m (2007: £0.4m). • Exceptional finance charges related to change in designation of interest rate hedging instrument of £1.5m (2007: £nil) > 2008 revenue by division > 2008 revenue by geography Further details are provided in Notes 3 and 7.

Dividends The Board is not recommending a dividend for the year to 31 December 2008 (2007: £nil). It is the Board’s policy that dividends will be paid, subject to availability of distributable reserves, when it is appropriate and prudent to do so. The main focus of the Company continues to be delivering capital growth for shareholders.

KPIs The Group uses a wide variety of performance indicators in the ■ UK 59.7% tracking and management of the business. Financial key performance ■ Continental Europe 22.6%% indicators (‘KPIs’) relate to revenue growth, EBITDA margins and ■ Rest of World 17.7%%

■ Laboratory Services 50.7% ■ Point-of-care 27.1% ■ Laboratory Products 22.2%

Concateno plc Annual Report and Accounts 2008 15 >> Board of Directors

1 2 5

3 4 6

1. Dr Christopher Hand 4. Neil Elton Non-Executive Director Finance Director Chris has a DPhil from the Faculty of Medicine, University of Oxford; a Neil qualified as a Chartered Accountant with Arthur Andersen. He BSc in Applied Biochemistry from Brunel University and is a was a consultant to Mecom from 2000 (one of Europe’s largest Chartered Chemist and Member of the Royal Society of Chemistry. newspaper publishers), joining the Board as Finance Director in Chris founded Cozart Bioscience Ltd in 1993 and was Chief March 2005, when the Company listed on AIM, until June 2006. Executive of Cozart plc following its listing onto AIM in 2004, until October 2007 when the Company was acquired by Concateno plc. Prior to Mecom, Neil was Group Finance Manager at Huntsworth plc, During this time the Company won three SMART awards from the the international PR group, with oversight of their financial PR and Department of Trade and Industry, won Millennium Product Status for healthcare divisions. Before that, he was Finance Director of MirrorTel, its ground breaking Cozart® RapiScan system and acquired Mirror Group plc’s television and audiotex division, and financial companies in Sweden, Spain and the UK. co-ordinator of the integration with Trinity International plc following their merger in 1999 to form Trinity Mirror plc. Prior to founding Cozart, Chris was Director of Research for the European base of the medical diagnostics company DPC (now part of 5. Vin Murria Siemens Healthcare Solutions). Chris is currently a Director of Non-Executive Director Abingdon Health Ltd. Vin has over 20 years’ experience of working for Venture Capital, Private Equity and publicly listed companies focused on the software 2. Fiona Begley sector. During this time, Vin has held a number of senior positions, Chief Executive Officer including Chief Executive Officer of Computer Software Group plc, Fiona holds a Bachelor of Science in Biochemistry from the National which she took private in May 2007. The company merged with University of Ireland, Galway and an MBA from Henley Management IRIS in July 2007 and was subsequently exited to Hellman Friedman College. Fiona joined Medscreen in 1996 as Sales and Marketing for $1bn. Manager. She was appointed General Manager in 1998, Managing Director in 2000 and led the management buy-out from PharmChem Vin is a Partner at Elderstreet Capital, and prior to this was European in 2002. Concateno plc acquired Medscreen as its platform Chief Operating Officer for Kewill Systems Plc and Chairman of Leeds acquisition in 2006. Group Plc. She is the Chief Executive Officer of Advanced Computer Software plc, and remains Chair of BSG plc, Innovise Plc and is a From 1992 to 1995, Fiona held management roles for Syva UK and Non-Executive Director at the Fredricks Charitable Foundation. Behring Diagnostics UK with a focus on business development and marketing in the diagnostics industry. Prior to 1992 Fiona was a 6. Keith Tozzi product manager and biochemist in the pharmaceuticals and Executive Chairman biotechnology sector. Keith has wide experience at board level in creating and developing successful businesses. He was Group Technical Director (one of 3. James Corsellis three Executive Directors) of Southern Water plc from 1992–1996. Non-Executive Director From 1996–2000, he was Chief Executive of the British Standards James has a BA (Hons) from London University and is currently Institution (a London based Independent Royal Charter Company) Managing Partner at Marwyn Investment Management. Over the past where he grew turnover to over £200m and acquired businesses two years at Marwyn, James has undertaken over 50 transactions in the UK, South America and Eastern Europe to leverage the brand. raising in excess of £1bn in acquisition funding for Marwyn backed From 2000–2003, he was Group Chief Executive of Swan Group plc management teams and special purpose acquisition vehicles. (owner of Mid Kent Water) and led a management buy-out backed by WestLB. James is currently a Director of Aldgate Capital plc, Drury Lane Capital plc, Entertainment One Ltd, Marwyn Value Investors, is Most recently, Keith was Chairman of Inspicio plc, an AIM-listed currently Deputy Chairman of Catalina Holdings Ltd and was testing and inspection company that was listed as a special purpose previously Chief Executive Officer of icollector plc. vehicle in April 2005 and sold for £264.3m in January 2008.

Concateno plc 16 Annual Report and Accounts 2008 >> Financial Statements Index

In this section

18 Directors’ Report 21 Corporate Governance Report 24 Directors’ Remuneration Report 26 Statement of Directors’ Responsibilities 27 Independent Auditors’ Report 28 Consolidated Income Statement 28 Consolidated Statement of Recognised Income and Expense 29 Consolidated Balance Sheet 30 Consolidated Cash Flow Statement 31 Notes to the Consolidated Financial Statements 61 Company Balance Sheet 62 Notes to the Company Balance Sheet 65 Advisers

Concateno plc Annual Report and Accounts 2008 17 >> Directors’ Report For the year ended 31 December 2008

The Directors present their report and the audited financial statements for the year ended 31 December 2008.

Business Review The Company is required by the Companies Act to include a business review in this report. The Directors’ Report contains a fair review of the business and a description of the principal risks and uncertainties facing the Group. A review of the business strategy and a commentary on the performance of the business is set out in the Chairman’s Statement, the Chief Executive’s Review and the Financial Review on pages 8 to 15. A discussion of key performance indicators is included within the Financial Review on pages 13 to 15.

The Directors’ Report is prepared for the members of the Company and should not be relied upon by any other party or for any other purpose. Where the Directors’ Report (including the Chairman’s Statement, the Chief Executive’s Review and the Financial Review) contains forward- looking statements, these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Consequently such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking statements or information.

Principal activities The principal activity of the Group is the development, manufacture and sale of medical diagnostic tests and services, predominantly those used for the detection of alcohol and drugs of abuse.

The principal activity of the Company is that of a holding Company. The subsidiary undertakings principally affecting the profits or net assets of the Group in the year are listed in Note 28 to the financial statements.

Going concern After making enquiries the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

The Company is currently in the process of negotiating a refinancing package. Further details are included in the Financial Review on pages 13 to 15.

Results and dividends The audited financial statements are set out on pages 18 to 63. The Group made a loss after taxation for the year ended 31 December 2008 of £424,000 (2007: profit of £665,000).

The Directors do not recommend the payment of a dividend for the period (2007: £nil).

Directors and their interests The Directors who held office during the year are detailed below.

K Tozzi Chairman F Begley Chief Executive Officer N Elton Finance Director J Corsellis Non-Executive Director V Murria Non-Executive Director C Hand Non-Executive Director

K Tozzi and F Begley retire by rotation in accordance with the Articles of Association and, being eligible, offer themselves for re-election.

The Directors’ beneficial interests in the ordinary shares of 10p each (‘ordinary shares’) of the Company, were as follows: Ordinary Ordinary shares of 10p shares of 10p 31 December 31 December 2008 2007 K Tozzi 143,000 100,000 F Begley 981,777 941,177 N Elton – – J Corsellis 58,824 58,824 V Murria 155,000 – C Hand 1,369,013 1,369,013

Details of the Directors’ share options and service contracts are shown in the Directors’ Remuneration Report on pages 24 and 25.

Biographical details of the Directors are given on page 16.

Concateno plc 18 Annual Report and Accounts 2008 Substantial shareholdings The Directors are aware of the following who have an interest in 3% or more of the Company as at 17 March 2009: Ordinary shares of 10p % Marwyn Investment Management LLP1 29,174,852 27.49 Fidelity (Institutional Group) 6,682,899 6.30 Powe Capital Management, LLP 4,808,669 4.53 Knox D’Arcy Investment Management Limited 3,609,913 3.40 Aviva Investors Global Services Limited 3,562,002 3.36 Schroder Investment Management Ltd. (SIM) 3,443,590 3.24 HSBC Investment Bank (MM) 3,260,700 3.07

1 Marwyn Investment Management LLP is the Investment Manager for both Marwyn Neptune Fund LP and Marwyn Ventures 1 LP, which hold 28,899,852 and 275,000 Concateno plc shares respectively.

Group research and development activities The total research and development activities undertaken by the Group amounted to £1,507,000 (2007: £306,000). All research and non- qualifying development costs were written off during the year in which they were incurred. During the year £1,125,000 (2007: £247,000) of development expenditure was capitalised in line with the accounting policy set out in Note 1 to the financial statements.

Charitable and political contributions During the year the Group made charitable donations of £6,578 (2007: £1,731) to charities serving the communities in which the Group operates. No political donations were made during the year.

Supplier payment policy It is the Group’s policy to settle debts with its creditors on a timely basis, taking into consideration the terms and conditions offered by each supplier. At 31 December 2008, the number of creditor days outstanding for the Group was 56 days (2007: 36 days).

The Group does not follow a standard code or payment practice.

Risks relating to the business of Concateno Internal Controls The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness whilst the role of management is to implement Board policies on risk management and control. It should be recognised that the Group’s system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve the Group’s business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss.

The Group is currently developing the risk management process, to embed it in normal management, and the governance process. These controls include, but are not limited to, the annual strategic planning and budgeting process, a clearly defined organisational structure with authorisation limits, reviews by senior management of monthly financial and operating information including comparisons with budgets, monthly treasury and cash flow reports and forecasts to the main Board and rules preventing speculation in derivatives.

The Board does not believe it is currently appropriate to establish a separate, independent internal audit function given the size of the Group. However, it undertakes reviews of internal controls on a regular basis and a Risk Review Committee was set up in 2008 to assist with this process.

Continued market growth The Company is reliant upon growth in the drug and alcohol testing market within the UK and Rest of the World in order to increase trading volumes. The dependence upon governmental and industrial testing requirements and the growth of these requirements is a risk that the Company cannot directly control, but can mitigate by entering new markets. The failure of such market growth to continue could have a material adverse impact on the Group’s business, financial condition, trading performance and prospects.

In the current economic climate, the Company faces additional pressures. However, with government-funded and regulated markets, management feel that this risk is somewhat mitigated.

Dependence upon key executives and personnel The Company has several key executives and senior personnel, who are of considerable worth to the Company in terms of their market knowledge, strategic importance, and intellectual property value. In order to ensure minimal risk to the Company, key person insurances and contractual obligations are in place to minimise the impact of loss of any of these persons. The loss of any member of the Group’s senior operational management could harm or delay the business whilst management time is directed to finding suitable replacements or if no suitable replacement is available to the Group. In either case this could have a material adverse effect on the future of the Group’s business. Whilst the Group has entered into service agreements with these key personnel, the retention of their services cannot be guaranteed.

Investment Strategy There can be no certainty that the Group will be able to successfully implement its strategy as set out in the Chairman’s statement. The ability of the Group to implement its strategy in a competitive market requires effective planning and management control systems. The Group’s future growth will depend on its ability to expand and improve operational, financial and management information and control systems in line with the Group’s growth. Failure to do so could have an adverse effect on the Group’s business and financial condition.

Concateno plc Annual Report and Accounts 2008 19 >> Directors’ Report continued For the year ended 31 December 2008

Law and regulation The Company operates its normal business activities within relevant legal and regulatory compliance listings. These risks include industry legislation, regulatory control and health and safety compliance. The Company operates over international boundaries that entail the risk of litigation and governmental non-compliance with regulatory requirements. These risks are minimised primarily by contractual obligations with stakeholders (e.g. customers and suppliers) and by compliance within reasonable operating activities.

The drugs of abuse testing market, being the Group’s core market area, is subject to a large number of laws and regulations. The Group’s success in the future will be dependent on the legislative framework in which it operates and the Directors have no influence over such matters.

Existing and future legislation, regulation and actions could cause additional expense, capital expenditure, restrictions and delays in the activities of the Group, the extent of which cannot be predicted. No assurance can be given that the new laws, rules and regulations will not be enacted or existing laws, rules and regulations will not be applied in a manner which could limit or curtail certain of the Group’s services.

Dependence on key customers The Company has the risk of dependence upon key customers. This risk is mitigated by developing a close relationship with clients and entering into contracts where possible. Given the increased scale of the Group the dependence on any one client has been significantly reduced during the year. Where there is risk remaining and insufficient evidence of collectability of debts from customers, an allowance for impairment is made.

Price risk The Group has no significant exposure to securities price risk as it holds no listed equity investments.

Financial Risk Management The Board considers that the main risks arising from the Group’s financial instruments are currency risk, credit risk, interest rate risk, liquidity risk and covenant risk. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors. The Group does not use derivative financial instruments for speculative purposes.

(i) Currency risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group uses foreign exchange forward contracts, where cost effective to do so, and otherwise uses natural hedging methods where possible to minimise exposure in this area.

(ii) Credit risk The Group’s principal financial assets are bank balances and cash, trade and other debtors.

The Group’s credit risk is primarily attributable to its trade debtors. The amounts presented in the balance sheet are net of allowances for doubtful debtors. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

(iii) Interest rate risk and liquidity risk In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term debt finance. The Group’s policy throughout the year has been to minimise risk by placing funds in low risk cash deposits but also to maximise the return on funds placed on deposit. The Group is currently undergoing refinancing negotiations. See Financial Review for details.

(iv) Covenant Risk The Group must comply with a number of financial covenants as part of the term loan facilities. The Group regularly monitors actual and forecast compliance with these covenants and makes regular reports to the banks.

Further details are provided in Note 19 of the Financial Statements.

Annual General Meeting The Annual General Meeting will be held at the offices of Collins Stewart, London on 14 May 2009 commencing at 10am.

Auditors Each of the persons who is a Director at the date of approval of this report confirms that:

(1) so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and (2) the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s234ZA of the Companies Act 1985.

In accordance with Section 384 of the Companies Act 1985, a resolution for the re-appointment of KPMG Audit Plc as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.

By order of the Board

Rowena Nixon Company Secretary

30 March 2009

Concateno plc 20 Annual Report and Accounts 2008 >> Corporate Governance Report For the year ended 31 December 2008

AIM listed companies are not required to comply with the disclosure requirements of the New Combined Code on Corporate Governance. However, the Board supports the principles contained in the New Combined Code and is committed to applying the principles set out therein where they are appropriate, given the Company’s size. The following provides information on how these principles have been applied but does not constitute full compliance with the New Combined Code.

Board of Directors The Company is controlled by the Board of Directors which comprises three Executive and three Non-Executive Directors.

The Board is responsible to shareholders for the proper management of the Group and meets formally at least every two months to set the overall direction and strategy of the Group, to review financial and operating performance and to advise on senior management appointments. Financial policy and budgets, including capital expenditure, are approved and monitored by the Board. All key operational decisions are subject to Board approval. The Company Secretary is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

Different Directors hold the roles of Chairman and Chief Executive and there is a clear division of responsibilities between them. Individual Directors possess a wide variety of skills and experience; biographical details of the Directors are set out on page 16.

The Non-Executive Directors are considered by the Board to be independent of management. The Board considers that the Non-Executive Directors are of sufficient calibre and number to bring the strength of independence to the Board. The terms and conditions of appointment of Non-Executive Directors are available on request.

The Board believes that given its size and constitution it is not appropriate to specify a ‘senior’ Non-Executive Director.

During the year, there have been 10 main Board meetings. The schedule on the following page gives attendance and non-attendance by Board members for meetings throughout the year.

All Board members receive monthly management accounts and regular management reports enabling them to review the Group’s performance against agreed objectives. Regular reports and papers are circulated to Directors in a timely manner in preparation for Board and Committee meetings. This information includes that specifically requested by the Non-Executive Directors from time to time.

Board evaluation The Board is mindful of the requirement to undertake an annual evaluation of its performance and that of its committees and individual Directors. It is the intention of the Board to adopt the following procedures in order to conduct performance evaluation.

The performance of the Board, its committees, the Executive Directors and Non-Executive Directors will be evaluated by the Chairman on an ongoing basis.

Re-election Directors are subject to election by shareholders at the first opportunity after their appointment and a third are subject to re-election at each Annual General Meeting.

Committees of the Board Audit Committee The Audit Committee comprises two Non-Executive Directors; Dr C Hand (Chairman) and J Corsellis. It overviews the monitoring of the Group’s internal controls, accounting policies and financial reporting and provides a forum through which the external auditors report. It also reviews the scope and results of the external audit and the independence and objectivity of the auditors and makes recommendations to the Board on issues surrounding their remuneration, appointment, resignation or removal. The Board is satisfied that the Audit Committee has sufficient financial knowledge and experience. The Audit Committee should meet at least twice a year with the external auditors.

During the year there have been three Audit Committee meetings. The meetings were attended by both Committee members.

Terms of reference for the Audit Committee are available on request. These include definition of its role and the authority delegated to it by the Board.

Remuneration Committee The Remuneration Committee comprises two Non-Executive Directors, J Corsellis (Chairman) and V Murria. The Committee reviews, inter alia, the performance of the Executive Directors and sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. The Remuneration Committee also makes recommendations to the Executive Directors concerning the allocation of share options to employees. The Committee should meet at least twice a year.

During the year, there have been two Remuneration Committee meetings. The meetings were attended by both Committee members at the time.

It is a policy of the Remuneration Committee that no individual participates in discussions or decisions concerning his own remuneration.

Terms of reference for the Remuneration Committee explain its role and the authority delegated to it by the Board. These are available on request.

Concateno plc Annual Report and Accounts 2008 21 >> Corporate Governance Report continued For the year ended 31 December 2008

The Directors’ Remuneration Report is set out on pages 24 and 25.

A summary of meeting attendances by the Board of Directors and its Committees is given below. Main Audit Remuneration Board Committee Committee AGM Executive Directors K Tozzi 10/10 – – 1/1 F Begley 10/10 – – 1/1 N Elton 10/10 – – 1/1 Non-Executive Directors J Corsellis 8/10 3/3 2/2 1/1 C Hand 10/10 3/3 – 1/1 V Murria 10/10 – 2/2 1/1

Internal control The Directors have overall responsibility for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance that the assets of the Group are safeguarded and that the shareholders’ investments are protected. The system includes internal controls covering financial, operational and compliance areas, and risk management. There are limitations in any system of internal control, which can provide reasonable but not absolute assurance with respect to the preparation of financial information, the safeguarding of assets and the possibility of material misstatement or loss.

The Board has considered and reviewed the effectiveness of the system of internal control. An assessment of the major risk areas for the business and methods used to monitor and control them was also considered. During the year under review, a number of key controls have been improved and integrated across the business. In addition to financial risk, the review covered operational, commercial, environmental, regulatory, and research and development risks. The risk review is an ongoing process with regular review by the Board at least annually.

The key procedures designed to provide an effective system of internal control that have operated throughout the year and up to the date of the sign-off of this report are described below:

Control environment The Group has a clearly defined organisational structure. Managers of operating units assume responsibility for, and exercise a high degree of autonomy in, running day-to-day trading activities. Employees are required to follow clearly laid out internal procedures and policies appropriate to the business and their position within the business.

Risk management The Group employs Directors and senior executives with the appropriate knowledge and experience for the Company. A formal risk management review is performed annually as part of the process of determining the Group’s system of internal controls and risk mitigation procedures.

Risk procedures are carried out via the centralised Quality Assurance system. Each business within the Group currently holds separate certification and/or accreditation:

• ISO 13485 – Medical Devices: o Cozart. o Spinreact. • ISO9001 – Quality Management System: o Medscreen. o Euromed. o Spinreact. o Cozart. • Cozart ISO 17025 – Testing and Calibration Laboratories: o Medscreen. o Altrix. o TrichoTech. o Cozart.

There is a dedicated Quality Manager at each site responsible for the day-to-day activities required to maintain certification/accreditation, and to report and escalate any issues that are identified. This provides an early warning system and ensures swift and effective corrective and preventative action.

The Group Quality Manager, based at Abingdon, oversees all activities and produces a weekly and monthly report for the Chief Operating Officer. These reports are discussed monthly at the Group Operational Executive and a monthly report is sent to the main Board. A single Quality System continues to be implemented ensuring that best practice is migrated across the Group.

Concateno plc 22 Annual Report and Accounts 2008 Financial information The Group prepares detailed budgets and cash flow projections, which are approved annually by the Board and updated regularly throughout the year. Detailed management accounts and working capital cash flow projections are prepared on a monthly basis and compared to budgets and projections to identify any significant variances.

Management of liquid resources The Board is risk adverse when investing the Group’s surplus cash funds. The Executive Directors monitor the Group’s cash position on a weekly basis. The Group’s treasury management policy is reviewed annually and sets out strict procedures and limits on how surplus funds are invested.

Internal audit The Board has considered it inappropriate to establish a formal internal audit function during the year, given the size of the Group. Although there has been no formal internal audit function, financial reviews have been performed between Group companies on a regular basis and work is under way to formalise this process more over the coming year.

Relations with shareholders The Board attaches great importance to effective communication with both institutional and private shareholders. In fulfilment of the Chairman’s obligations under the new Combined Code, the Chairman gives feedback to the Board on issues raised with him by major shareholders. Regular communication is maintained with all shareholders through Company announcements, the Annual Report and Financial Statements, Preliminary Results and the Interim Report.

All shareholders are sent copies of the Interim and Annual Reports and are given notice to enable them to attend the Company’s Annual General Meeting and any Extraordinary General Meeting. Shareholders whose shares are held by nominees may receive the information on request. The Annual General Meeting is normally attended by all Directors, and shareholders are invited to ask questions during the meeting and to meet with Directors after formal proceedings.

In addition, the Company operates a website: www.concateno.com. It contains information on the Group and its activities, press releases and regulatory announcements, Annual Financial Statements and Interim Statements, and details of the Company’s share price.

Concateno plc Annual Report and Accounts 2008 23 >> Directors’ Remuneration Report For the year ended 31 December 2008

The following information has been provided in accordance with best practice even though it is not all a requirement of the AIM Rules of the London Stock Exchange. The information presented in the Directors’ Remuneration Report is unaudited unless otherwise stated.

Remuneration policy The Remuneration Committee currently comprises two Non-Executive Directors; J Corsellis and V Murria. The Chairman and other senior executives attend meetings from time to time at the invitation of the Committee. Remuneration levels are set in order to attract high calibre recruits and to retain and motivate those Directors and employees once they have joined the Group.

Remuneration package for Executive Directors The individual components of the remuneration package offered to Executive Directors are as follows:

(i) Basic salary Basic salaries are reviewed on a regular basis. The review process is undertaken by having regard to the development of the Group and the contribution that individuals will continue to make. Consideration is also given to the need to retain and motivate individuals and information on the salary levels in comparable organisations.

(ii) Annual performance incentives Annual performance incentives in the form of cash bonus payments are reviewed on an annual basis and are designed to reward Executive Directors for exceptional performance.

(iii) Pension and other benefits The Company makes contracted contribution into personal pension schemes for the Executive Directors.

Other benefits provided to Executive Directors are life assurance and private medical insurance.

(iv) Share options Options granted to employees under the Company’s Enterprise Management Incentive (‘EMI’) or Employee Benefit Trust Incentive Scheme are recommended by the Executive Directors and approved by the Remuneration Committee.

Executive Directors are awarded share options at the discretion of the Remuneration Committee. Share options are granted at the closing mid-market value of the Company’s ordinary shares on the day prior to grant, or where the Remuneration Committee consider that the share options are issued further to an acquisition event they are granted at the share price pertaining to that acquisition event.

Remuneration policy for Non-Executive Directors The remuneration of the Non-Executive Directors is determined by the Board as a whole, based on a review of current practices in other companies.

The Non-Executive Directors have service agreements which are reviewed by the Board annually.

Audited information Directors’ remuneration The Directors received the following remuneration during the year: Salary Taxable Pension Total Total and fees Bonus benefits contributions 2008 2007 Name of Director £ £ £ £ £ £ Executive K Tozzi 123,917 15,000 7,987 11,500 158,404 6 67,3 0 6 F Begley 218,729 25,000 5,770 37,923 287,422 743,590 N Elton 145,500 15,000 4,249 13,667 178,416 65,309 Non-Executive J Corsellis 10,000 – – – 10,000 14,671 V Murria 35,000 – – – 35,000 8,750 C Hand1 76,500 – – – 76,500 16,666 609,646 55,000 18,006 63,090 745,742 1,516,292

1 C Hand received £35,000 (2007: £5,000) for Non-Executive duties and £41,500 (2007: £11,666) for work in relation to the collaboration with Philips.

Concateno plc 24 Annual Report and Accounts 2008 Directors’ share options Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Company granted to or held by the Directors under the EMI Share Option Scheme. Details of the options are as follows (see Note 24 of the accounts for performance conditions):

At Options Options Options At 1 January granted exercised lapsed 31 December Exercise Exercise Expiry Name of Director Class 2008 Number Number Number 2008 price (p) date date Executive K Tozzi A 50,000 – – – 50,000 85.0 07/11/2009 07/11/2016 B 49,999 – – – 49,999 85.0 07/11/2009 07/11/2016 F Begley A 50,000 – – – 50,000 85.0 07/11/2009 07/11/2016 B 49,999 – – – 49,999 85.0 07/11/2009 07/11/2016 N Elton C – 38,461 – – 38,461 130.0 21/01/2011 20/01/2018 D – 38,462 – – 38,462 130.0 21/01/2011 20/01/2018 Non-Executive J Corsellis – – – – – V Murria – – – – – C Hand – – – – –

Employee Benefit Trust Aggregate emoluments disclosed above do not include any amounts for the value of Employee Benefit Trust Incentive Scheme (‘EBT’) ordinary shares in the Company granted to SG Hambros Trust Company (Channel Islands) Limited. SG Hambros Trust Company (Channel Islands) Limited, as trustee of a trust of which the Directors and certain of their relatives are potential beneficiaries, hold the following options and ordinary shares (see Note 24 to the accounts for performance conditions):

Options/ Options/ Options/ At shares shares shares At 1 January granted exercised lapsed 31 December Exercise Exercise Expiry Scheme Class 2008 Number Number Number 2008 price (p) date date EBT Share Option Scheme A 700,000 – – – 700,000 86.0 07/11/2009 07/11/2016 EBT Share Option Scheme B 700,002 – – – 700,002 86.0 07/11/2009 07/11/2013 EBT Share Option Scheme E – 711,538 – – 711,538 142.0 12/06/2011 12/06/2015 EBT Share Option Scheme F – 711,539 – – 711,539 142.0 12/06/2011 12/06/2015 EBT Share Scheme 2,980,047 – – – 2,980,047 N/A N/A N/A

Directors’ shareholdings The Directors who served during the period, together with their beneficial interests in the shares of the Company, are detailed in the Directors’ Report on pages 18 to 20.

Performance graph The graph below shows a comparison between the Company’s total shareholder return performance compared with FTSE AIM All Share and Support Service sectors of the London Stock Exchange. The graph covers the period from 1 January 2008 to 19 March 2009. The Directors have selected the Support Services sector as a comparison as they believe that the constituent companies most closely reflect the nature and operations of Concateno. The market price of the Company’s shares as at 31 December 2008 was 93.5p and the range during the period between 1 January 2008 and 31 December 2008 was 85.3p–170.30p.

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60 Concateno FTSE Support Services 40 FTSE All Small 02/11/08 02/01/08 02/02/08 02/03/08 02/04/08 02/05/08 02/06/08 02/07/08 02/08/08 02/09/08 02/10/08 02/12/08 02/01/09 02/02/09 02/03/09

By order of the Board

Keith Tozzi Chairman

30 March 2009

Concateno plc Annual Report and Accounts 2008 25 >> Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial Statements For the year ended 31 December 2008

The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange, they are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

The Group Financial Statements are required by law and IFRSs as adopted by the EU to present fairly the financial position and the performance of the Group; the Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

The parent company financial statements are required by law to give a true and fair view of the state of affairs of the parent company.

In preparing each of the Group and parent company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; • for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors have decided to prepare voluntarily a Directors’ Remuneration Report in accordance with Schedule 7A to the Companies Act 1985, as if those requirements were to apply to the Company. The Directors have also decided to prepare voluntarily a Corporate Governance Statement as if the Company were required to comply with the Listing Rules of the Financial Services Authority in relation to those matters.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board

Fiona Begley Chief Executive Officer

30 March 2009

Concateno plc 26 Annual Report and Accounts 2008 >> Independent Auditors’ Report For the year ended 31 December 2008

To the members of Concateno plc We have audited the group and parent company financial statements (the ‘financial statements’) of Concateno plc for the year ended 31 December 2008 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Recognised Income and Expense and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is being described as audited.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors The Directors’ are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (‘IFRSs’) as adopted by the EU, and for preparing the parent company financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities on page 26.

Our responsibility is to audit the financial statements in accordance with relevant and regulatory requirements and International Standard on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ Remuneration Report to be audited give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. The information given in the Directors’ Report includes that specific information presented in the Chairman’s Statement, Chief Executive’s Review and Financial Review that is cross referred from the Business Review section of the Directors’ Report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion In our opinion:

• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the group’s affairs as at 31 December 2008 and of its loss for the year then ended; • the parent company financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 31 December 2008; • the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985, and; • the information given in the Directors’ Report is consistent with the financial statements.

KPMG Audit Plc 1 Forest Gate Brighton Road Crawley RH11 9PT Registered Auditor 30 March 2009

Concateno plc Annual Report and Accounts 2008 27 >> Consolidated Income Statement For the year ended 31 December 2008

Year ended Year ended 31 December 31 December 2008 2007 Notes £’000 £’000 £’000 £’000 Revenue 2 47,474 26,064 Cost of sales (20,024) (10,617) Gross profit 27,450 15,447 Administrative expenses before the following items: (16,003) (10,055) Non-recurring administrative expenses 3 (3,002) (785) Share-based payments (555) (439) Amortisation of business combination intangible assets 11 (3,659) (2,193) Total administrative expenses (23,219) (13,472) Operating profit 4 4,231 1,975 Finance income 7 76 380 Finance expenses 7 (3,366) (2,032) Exceptional charge in respect of interest hedge 7 (1,533) – Net finance costs (4,823) (1,652) Profit/(loss) before taxation (592) 323 Taxation 8 168 342 Profit/(loss) for the period attributable to equity shareholders of the Company (424) 665

Earnings/(loss) per share 9 Basic (pence per share) (0.43)p 1.05p Diluted (pence per share) (0.43)p 1.04p

The consolidated income statement has been prepared on the basis that all operations are continuing operations.

The accompanying notes are an integral part of the consolidated financial statements.

>> Consolidated Statement of Recognised Income and Expense For the year ended 31 December 2008

Year ended Year ended 31 December 31 December 2008 2007 Notes £’000 £’000 Foreign currency translation differences for foreign operations 22 2,162 298 Changes in fair value of effective cash flow hedges 16 184 (184) Income and expense recognised directly in equity 2,346 114 Profit/(loss) for the period (424) 665 Total recognised income and expense for the period attributable to equity shareholders of the Company 1,922 779

Concateno plc 28 Annual Report and Accounts 2008 >> Consolidated Balance Sheet As at 31 December 2008

As at As at 31 December 31 December 2008 2007 Notes £’000 £’000 Assets Non-current assets Goodwill 11 98,335 97,938 Other intangible assets 11 43,426 46,183 Property, plant and equipment 12 3,691 3,410 Deferred tax assets 13 1,081 858 146,533 148,389 Current assets Inventories 14 4,935 3,855 Current tax assets 204 174 Trade and other receivables 15 14,712 11,819 Derivative financial instruments 16 – 3 Cash and cash equivalents 17 4,292 3,888 24,143 19,739 Total assets 170,676 168,128 Liabilities Current liabilities Bank overdrafts 17 2,965 1,685 Loans and borrowings 18 25,110 3,931 Derivative element of convertible loan 18 – 417 Derivative financial instruments 16 1,612 184 Current tax liabilities 1,438 1,281 Trade and other payables 20 9,729 8,892 Provisions 21 1,120 1,541 41,974 17,9 31 Non-current liabilities Loans and borrowings 18 326 33,651 Provisions 21 774 729 Deferred tax liabilities 13 11,582 12,629 12,682 47,0 0 9 Total liabilities 54,656 64,940 Shareholders’ equity attributable to equity Shareholders of the Company Share capital 22 10,614 9,530 Share premium account 22 99,146 89,875 Other reserves 22 10,304 7,9 58 Retained earnings 22 (4,044) (4,175) Total shareholders’ equity attributable to equity shareholders of the Company 116,020 103,188 Total shareholders’ equity and liabilities 170,676 168,128

The financial statements were approved by the Board of Directors and authorised for issue on 30 March 2009. They were signed on its behalf by:

Fiona Begley Neil Elton Chief Executive Officer Finance Director

30 March 2009 30 March 2009

The accompanying notes are an integral part of the consolidated financial statements.

Concateno plc Annual Report and Accounts 2008 29 >> Consolidated Cash Flow Statement For the year ended 31 December 2008

Year ended Year ended 31 December 31 December 2008 2007 Note £’000 £’000 Cash flows from operating activities Profit/(loss) for the period (424) 665 Depreciation and other non-cash items: Depreciation 1,238 569 Amortisation of intangible assets and loan issue costs 4,050 2,395 Impairment losses on intangible assets 71 – Impairment losses on property, plant and equipment 90 – Share-based payments 555 439 Loss on disposal of property, plant and equipment – (15) Net finance costs 4,823 1,652 Taxation (168) (342) 10,235 5,363 Increase in trade and other receivables (1,657) (247) Increase in inventories (156) (262) Increase in trade and other payables 214 227 Cash generated from operations 8,636 5,081 Tax (paid)/received, net (979) (33) Net cash flows from operating activities 7,657 5,048 Cash flows from investing activities Acquisitions of businesses (net of cash acquired) (219) (101,613) Purchase of property, plant and equipment (1,771) (569) Development expenditure (1,129) (248) Net cash flows from investing activities (3,119) (102,430) Cash flows from financing activities Net proceeds from issue of share capital – 71,454 Proceeds from exercise of share options 85 136 Proceeds from borrowings – 29,722 Repayment of borrowings (net of debt issue costs) (3,878) (1,250) Interest received 75 133 Interest paid (2,330) (1,264) Net cash flow from financing activities (6,048) 98,931 Increase/(decrease) in cash and cash equivalents for the period (1,510) 1,549 Cash and cash equivalents at start of period 2,203 654 Effect of foreign exchange fluctuations on cash held 634 – Cash and cash equivalents at end of period 17 1,327 2,203

The accompanying notes are an integral part of the consolidated financial statements.

Concateno plc 30 Annual Report and Accounts 2008 >> Notes to the Consolidated Financial Statements For the year ended 31 December 2008

1 Accounting policies Concateno plc (the ‘Company’) is a company domiciled in the United Kingdom. The consolidated financial statements of the Company as at and for the year ended 31 December 2008 comprise the Company and its subsidiaries (together referred to as the ‘Group’ or ‘Concateno’).

(a) Statement of compliance The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’). The Company has elected to prepare its parent company financial statements in accordance with UK GAAP; these are presented on pages 61 to 64.

(b) Basis of preparation Notwithstanding the Group’s net current liabilities of £17.8m as at 31 December 2008, the financial statements have been prepared on a Going Concern basis, which assumes that the Group will continue in operational existence for the foreseeable future, which the Directors believe is appropriate for the following reasons.

The Group term loan of £25.0m at 31 December 2008 is included within current liabilities as it is due to be repaid in full on 31 December 2009. As at 30 March 2009, the Group had not finalised the refinancing of that loan beyond the end of 2009.

However, the Directors have taken the following actions to support the basis of preparation:

• Held discussions with a number of banks whose Credit Committees have agreed in principle to provide re-financing in full either individually or in partnership. These banks have undertaken extensive due diligence. • Prepared projections for the results and cash flows of the Group for the next three years. These projections indicate that the Group will continue to operate within the current agreed facilities covenants and the facilities and any covenants which the Directors expect to agree when the Group comes out of the current offer period. The Directors have considered the assumptions made and consider the forecasts to be reasonable and realistic.

The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements. These accounting policies are set out below and have been applied consistently throughout all periods. In these financial statements the following Adopted IFRSs are effective for the first time. Unless stated otherwise, they have not had a material effect on the financial statements:

• IFRS 7 ‘Financial Instruments: Disclosures’ and the related amendment to IAS 1 ‘Presentation of Financial Statements’ in relation to capital disclosures • IFRIC 8 ‘Scope of IFRS 2 Share-based Payment’. • IFRIC 9 ‘Reassessment of Embedded Derivatives’. • IFRIC 10 ‘Interim Financial Reporting and Impairment’. • IFRIC 11 ‘IFRS 2 – Group and Treasury Share Transactions’.

(c) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except that derivative financial instruments are stated at fair value.

(d) Functional and presentational currency The consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional currency. All financial information presented in Pounds Sterling has been rounded to the nearest one thousand.

(e) Basis of judgement The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:

• Note 11 – Carrying amount of intangible assets and measurement of the recoverable amounts of cash generating units. Many intangible assets have been valued using management’s best estimate of future cashflows expected to arise. • Note 11 – The Group invests in the development of future products and material enhancement of existing products in accordance with the accounting policy. The assessment as to whether each element of this expenditure will be technically feasible, generate future economic benefit or the period over which to amortise the expenditure is a matter of judgement. The carrying value of product development capitalised and the amounts capitalised and amortised in the year are detailed in Note 11. • Note 13 – Utilisation of tax losses. The proportion of deferred tax assets recognised is a result of management’s best estimate of future profit streams.

Concateno plc Annual Report and Accounts 2008 31 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

1 Accounting policies continued • Note 15 – Trade receivables provision. The value of provision made against bad or doubtful debts follows detailed customer-by-customer review by management. The final provision arrived upon is a result of management’s best estimate of future recoverability and therefore involves a degree of judgement. • Note 21 – Provisions and contingencies. The value of provisions recognised in relation to ongoing enquiries is based on management’s best estimate of total costs still to be incurred. Judgement is also involved in assessing the amount of deferred and contingent consideration to be recorded; amounts recognised are based on management’s assessment of the likelihood of warranties impacting final payments and expectation in relation to future performance conditions being met.

(f) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Applicable trading and market conditions have been considered in this process in order to ensure that the policies are still appropriate to that subsidiary’s situation.

(ii) Transactions eliminated on consolidation Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(g) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Pounds Sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Pounds Sterling at foreign exchange rates ruling at the dates the fair value was determined.

(ii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; and • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions).

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Foreign currency differences are recognised directly in equity. Since 1 April 2006, the Group’s date of transition to IFRSs, such differences have been recognised in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in this reserve is transferred to profit or loss.

(h) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents (see Note (o) below), loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Concateno plc 32 Annual Report and Accounts 2008 1 Accounting policies continued (i) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are initially recognised at fair value of which the best estimate can be initial cost. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.

(i) Cash flow hedges When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the forecasted transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or the forecast transaction for a non-financial asset or non-financial liability the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a financial liability, then the associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss (i.e. when interest income or expense is recognised).

For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or loss is removed from equity and recognised in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any gain or loss is recognised immediately in profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction still is expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in profit or loss.

(ii) Hedge of monetary assets and liabilities When a derivative financial instrument is used as an economic hedge of the foreign exchange exposure of a recognised monetary asset or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised as part of foreign currency gains and losses.

(j) Compound financial instruments The Group had Convertible loan notes which are regarded as compound financial instruments, consisting of a liability component and a derivative component. At the date of issue, the fair value of the liability component is established using an estimate for a similar non-convertible debt. The difference between the proceeds of issue of the convertible debt and the fair value assigned to the debt component, representing the embedded option to convert the debt, is included as a separate component of liabilities (‘derivative element of convertible loan’) unless it fully meets the definition of equity (in which case, it is charged directly in equity),

Any issue costs are apportioned between the liability and derivative components of the convertible loan notes based on the relative carrying amounts at the date of issue. The portion relating to the derivative component is not re-measured subsequent to initial recognition.

The interest expense on the debt component consists of the coupon rate and the element of the derivative component proportionate to the debt component outstanding. This latter part is added to the carrying amount of the convertible loan notes.

(k) Property, plant and equipment (i) Owned assets Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy q). When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment.

(ii) Leased assets Leases in terms of which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases.

(iii) Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as an expense as incurred.

Concateno plc Annual Report and Accounts 2008 33 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

1 Accounting policies continued (iv) Depreciation Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

• Leasehold buildings – over the remaining life of the lease • Plant and equipment – 3–10 years

The residual value, depreciation method and useful lives are reassessed annually.

(l) Intangible assets (i) Goodwill All business combinations are accounted for by applying the purchase method. Goodwill has been recognised in acquisitions of subsidiaries. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but is tested annually for impairment (see accounting policy q).

(ii) Research and development Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as an expense as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends, and has sufficient resources, to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of direct overheads. Other development expenditure is recognised in the income statement as an expense as incurred.

Capitalised development expenditure is stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy q).

(iii) Other intangible assets Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy q). Other intangible assets include customer relationships and brands. Expenditure on internally generated goodwill and brands is recognised in profit or loss as an expense as incurred.

(iv) Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(v) Amortisation Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets once they are available for use. Goodwill with an indefinite useful life is tested systematically for impairment at each annual balance sheet date. The estimated useful lives of intangible assets are as follows:

• Customer relationships – 7–20 years • Customer contracts – 7–10 years • Commercial agreements – 10–12 years • Patents and trademarks – 10–20 years • Capitalised development costs – 3–5 years

(m) Trade and other receivables Trade and other receivables are initially measured on the basis of their fair value. Subsequently they will be carried at amortised cost using the effective interest method less any impairment losses (see accounting policy q).

(n) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(o) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Any bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Concateno plc 34 Annual Report and Accounts 2008 1 Accounting policies continued (p) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligations; and, the amount can be reasonably estimated. Provisions are split between current and non-current liabilities, where appropriate, provisions are calculated by discounting the expected future cash flows at a pre-tax rate that reflects market assessments of the time value of money and the risks specific to the liability.

(q) Impairment (excluding inventories and deferred tax assets) The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

At the date of transition to Adopted IFRSs, no business combinations had been effected and the Company held no intangible assets or assets which had an indefinite useful life.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

(i) Calculation of recoverable amount The recoverable amount of the Group’s receivables carried at amortised cost are calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

(ii) Reversals of impairment An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(r) Non-recurring items The Group presents as non-recurring items on the face of the income statement those material items of income and expenditure which because of their nature and/or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand the elements of financial performance in the period, so as to facilitate comparison with prior periods.

Concateno plc Annual Report and Accounts 2008 35 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

1 Accounting policies continued (s) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest- bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest basis.

(t) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use of sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

(u) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as incurred.

(ii) Share-based payment transactions The share option programme allows Group employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a binomial lattice model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.

(v) Revenue (i) Goods sold Revenue represents the amounts receivable for goods provided less trade discounts, returns and allowances, VAT and other sales related taxes.

The Group records transactions as sales when the significant risks and rewards have been transferred to the buyer in accordance with the terms of trade. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Transfer of risks and rewards vary depending on the individual terms of the contract of sale. For the majority of ‘Point-of-Care testing’ and ‘Laboratory Product’ sales, transfer usually occurs when the product is received at the customer’s site; however, for some international shipments, transfer occurs upon loading goods onto the relevant carrier.

A bill and hold arrangement is in place with one UK customer for whom the Group stores the customers finished product, on their request, and arranges delivery as and when they require it. Revenue is recognised when substantially all the risks and rewards of ownership have been transferred to the buyer, even though it has not all been dispatched to the customer’s site(s).

Income received in advance of the provision of goods is held in deferred income within the balance sheet until those goods have been delivered.

(ii) Services rendered The Group provides services chiefly in respect of its ‘Laboratory Services’ division. Revenue represents the amounts receivable for services provided less trade discounts, returns and allowances, VAT and other sales related taxes.

The Group records transactions as sales when the performance of services has taken place in accordance with the terms of trade. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or associated costs.

Income received in advance of the provision of services is held in deferred income within the balance sheet until those services have been provided.

Concateno plc 36 Annual Report and Accounts 2008 1 Accounting policies continued (w) Expenses (i) Operating lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

(ii) Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(iii) Finance costs Financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in profit or loss.

Interest income is recognised in profit or loss as it accrues, using the effective interest method. The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method.

(x) Income tax Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(y) Adopted IFRSs not yet applied At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:

• IFRS 8 Operating segments. • IFRS 2 Amendment – Share-based Payment: Vesting Conditions and Cancellations. • IFRS 3 Amendment – Business Combinations. • IAS 1 Amendment – Presentation of Financial Statements. • IAS 23 Amendment – Borrowing costs. • IAS 27 Amendment – Consolidated and Separate Financial Statements. • IAS 32 Amendment – Financial Instruments: Presentation. • IFRIC 12 Service Concession Arrangement. • IFRIC 13 Customer Loyalty Programmes. • IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction.

The Directors do not anticipate that the adoption of any of the above standards or interpretations will have a material impact on the Group’s accounts in the period of initial application. However, there may be amendments to these disclosures following completion of the internal review exercise currently under way in respect of IFRS 8 ‘Operating segments’.

2 Segmental information A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly loans and borrowings and related expenses, corporate assets and head office expenses, and income tax assets and liabilities.

Concateno plc Annual Report and Accounts 2008 37 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

2 Segmental information continued Business segments The Group comprises the following main business segments:

• Laboratory services. • Point-of-Care testing products. • Laboratory products.

Other revenues include training and consultancy work performed for workplace customers. These revenues have been allocated to ‘Point-of- Care’ and ‘Laboratory services’ in proportion to other work performed for these particular customers.

Results, split by business segment, are presented below.

Laboratory Services Point-of-Care Laboratory Products Eliminations Consolidated 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’00 Total external revenues 24,064 19,080 12,878 4,470 10,532 2,514 – – 47,474 26,064 Inter segment revenues 700 342 1,493 396 105 11 (2,298) (749) – - Total segment revenues 24,764 19,422 14,371 4,866 10,637 2,525 (2,298) (749) 47,474 26,064 Segment result, before non-recurring items 6,415 3,174 2,216 502 1,272 139 – – 9,903 3,815 Non-recurring items (1,546) (568) (471) (20) (99) – – – (2,116) (588) Segment result, after non-recurring items 4,869 2,606 1,745 482 1,173 139 – – 7,787 3,227 Unallocated (including non-recurring) expenses (3,556) (1,252) Results from operating activities 4,231 1,975 Net finance costs (including exceptional finance costs) (4,823) (1,652) Income tax credit 168 342 Profit/(loss) for the period (424) 665 Non-recurring and exceptional items 4,535 785 Profit/(loss) for the period before non-recurring and exceptional items 4,111 1,450 Segment assets 84,001 80,705 65,864 59,440 20,477 26,383 – – 170,342 166,528 Unallocated assets 334 1,600 Total assets 170,676 168,128 Segment liabilities 13,263 11,264 8,524 8,166 3,790 4,434 – – 25,577 23,864 Unallocated liabilities 29,079 41,076 Total liabilities 54,656 64,940 Property, plant and equipment (‘PPE’) expenditure 1,302 385 267 65 82 10 – – 1,651 460 Unallocated PPE expenditure 3 109 Total PPE capital expenditure 1,654 569 Depreciation 531 464 488 81 206 19 – – 1,225 564 Unallocated depreciation 13 5 Total Depreciation 1,238 569 Amortisation of intangible assets 1,725 1,478 1,665 640 430 115 – – 3,820 2,233

Intangible asset additions, by business segment, are disclosed in Note 11.

Concateno plc 38 Annual Report and Accounts 2008 2 Segmental information continued Geographical segments The Group’s business segments are managed on a worldwide basis, but operate in two principal geographical areas; the United Kingdom and Continental Europe (defined here as all European countries apart from the United Kingdom). Continental Europe production facilities/sales offices are located in Spain (predominantly operating in the Laboratory Products business segment), Sweden (Laboratory Services and Point-of-care testing products) and Italy (Point-of-care testing products).

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. This is split between the United Kingdom, Continental Europe and ‘Rest of World’. Within ‘Rest of World’ are a high proportion of customers who are based in South America. Segment assets and capital expenditure are based on the geographical location of the assets.

United Kingdom Continental Europe Rest of World Consolidated 2008 2007 2008 2007 2008 2007 2008 2007 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Revenue from external customers 28,331 18,201 10,723 4,982 8,420 2,881 47,474 26,064 Segment assets 154,768 149,804 15,908 18,324 – – 170,676 168,128 Capital expenditure 1,564 506 90 63 – – 1,654 569

3 Non-recurring items 2008 2007 £’000 £’000 Restructuring: Employee costs 1,290 375 Restructuring: Consultancy costs 247 – Restructuring: Onerous rent 445 – Restructuring: Other operating costs 197 24 Legal and advisory 662 386 Impairment charge 161 – 3,002 785

Restructuring Following the various acquisitions during 2007, the Company reviewed the operating structure of the business, as a result of which £1,290,000 (2007: £375,000) was incurred in redundancy and employee integration costs, £247,000 in consultancy, recruitment agency and advisory fees (2007: £nil) and £197,000 (2007: £24,000) on other one-off restructuring costs associated with the rationalisation of the Group’s laboratories and restructuring of the sales and marketing structure.

Following the closure of a number of sites across the Group, the delay in sub-letting a number of premises has led to onerous rental costs of £445,000 (2007: £nil) being incurred. This includes an onerous lease provision of £382,000 held as at 31 December 2008.

Legal and advisory The non-recurring legal and advisory costs relate to non-routine professional costs incurred during the period:

£25,000 of costs relate to one legal case which is on-going. This provision represents the excess insurance costs to be paid should the case proceed. In 2007, £20,000 of unrecoverable costs were incurred in relation to two legal cases involving former Group employees. In neither case were charges upheld against the Group.

£75,000 (2007: £169,000) relates to costs and advisory fees relating to tax enquiries by HMRC that are non-recurring in nature. £285,000 (2007: £nil) was incurred in relation to one-off bank fees. In 2007, £54,000 related to external advice given in relation to the transition to International Financial Reporting Standards and the review of that advice.

£277,000 (2007: £143,000) relates to charges incurred on completed acquisitions that have not been included as part of the cost of acquisition, or to fees incurred relating to exploratory work on acquisitions that were not progressed during the year, or to fees in relation to the on-going strategic review process announced in July 2008.

Impairment charge Following an impairment review, the value of one particular intangible asset acquired as part of the Cozart acquisition was found to be impaired as at 31 December 2008. One particular customer contract with a carrying value of £71,000 was written-off in the period as a result (2007: £nil).

Following a revaluation of a property owned by the Group, the carrying value of the property was written down by £90,000 as at the end of 2008 (2007: £nil)

Concateno plc Annual Report and Accounts 2008 39 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

4 Operating profit Profit for the year has been arrived at after charging/(crediting): 2008 2007 £’000 £’000 Net foreign exchange gains (815) (85) Research and development costs 382 59 Depreciation of property, plant and equipment 1,283 757 Amortisation of – capitalised development costs 161 40 – other intangible assets 3,659 2,193 – debt issue costs 230 162 Loss on disposal of fixed assets – 16 Restructuring costs (included in ‘non-recurring costs’, see Note 3) 2,179 399 (Decrease)/Increase in provisions (see Note 21) (376) 2,270 Staff costs (see Note 6) 11,639 7,53 3

5 Auditors remuneration The analysis of auditors’ remuneration is as follows: 2008 2007 £’000 £’000 Audit of these financial statements 50 82 Audit of financial statements of subsidiaries pursuant to legislation 134 148 Other services relating to taxation 140 61 Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company of the Group 85 443 Other services 8 7 417 741

Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

6 Staff costs and numbers The average monthly number of employees (including Directors) for the Group during the year, analysed by category, was: 2008 2007 Number Number Production and development 88 27 Laboratory services 83 66 Sales, marketing and distribution 49 39 Administration 118 70 338 202

Their aggregate remuneration comprised: 2008 2007 £’000 £’000 Wages and salaries 9,366 6,305 Share based payments 555 439 Social security costs 1,283 612 Other pension costs 435 177 11,639 7,53 3

Details regarding Director’s Remuneration is included within the Director’s Remuneration Report on pages 24 to 25.

Concateno plc 40 Annual Report and Accounts 2008 7 Finance income and expense 2008 2007 £’000 £’000 Interest income 76 377 Interest expense on bank loans and overdrafts (3,259) (2,007) Ineffective portion of change in fair value of cashflow hedges (82) 3 Finance charges in respect of finance leases and hire purchase contracts (25) (25) (3,290) (1,652) Exceptional charge in respect of interest hedge (1,533) – (4,823) (1,652)

A charge of £1,533,000 (2007: £nil) has been recognised in respect of the fair valuation of a derivative financial instrument previously designated as an effective hedge. This total charge comprises £184,000 previously recognised in equity and £1,349,000 current year change in fair value. Under IAS 39, effectiveness testing is undertaken to ascertain whether changes in the fair value of the hedged item are offset by changes in the fair value of the hedging instrument within a range of 80–125%. The interest rate hedge, details of which are set out in Note 19, as at 31 December 2008 is outside this range and therefore the full charge has been recognised in the Income Statement.

8 Taxation Recognised in the Income Statement: 2008 2007 £’000 £’000 Current tax: UK current year tax expense 951 439 Foreign current year tax expense 331 60 Adjustment in respect of prior periods (179) (351) 1,103 148 Deferred tax: Origination and reversal of temporary timing differences (1,053) (251) Adjustment due to 2008 rate change – (239) Adjustment in respect of previous periods (218) – (1,271) (490) Total tax in the income statement (168) (342)

Reconciliation of effective tax rate:

The tax charge for the period is lower than the standard rate of corporation tax in the UK (28.5%). The differences are explained below:

Profit/(loss) before tax (592) 323

Tax using the UK corporation tax rate of 28.5% (2007: 30%) (169) 97

Non-deductible expenses 459 240 R&D tax relief (145) (82) Prior period adjustments (396) (351) Tax losses carried forward 124 4 Other tax reliefs – (20) (Lower)/Higher tax rate on overseas earnings (41) 9 Adjustment due to 2008 rate change – (239) Total tax in the income statement (168) (342)

Income tax recognised directly in equity: Relating to share-based payments – 13 Total tax recognised directly in equity – 13

Concateno plc Annual Report and Accounts 2008 41 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

9 Earnings/(loss) per share Earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares held during the year.

An adjusted earnings per share figure is also presented below in order to aid users understanding of underlying business performance. This is calculated by adjusting the profit/(loss) for the year for the post-tax effect of certain items which, the Directors believe, will allow shareholders to better understand the elements of financial performance in the period, so as to facilitate comparison with prior periods.

Basic Basic and diluted and diluted 2008 2007 Notes £’000 £’000 For basic and diluted earnings/(loss) per share Profit/(loss) for the year (424) 665 For adjusted earnings per share add back intangibles amortisation (post-tax) 11 2,634 1,579 add back non-recurring and exceptional costs (post-tax) 3 3,444 736 add back share-based payments (post-tax) 22 555 357 Adjusted profit for the year 6,209 3,337 Weighted average number of ordinary shares For basic earnings/(loss) per share 98,054,022 63,020,125 Exercise of share options –1 912,274 Exercise of warrants –1 187,3 0 9 For diluted earnings/(loss) per share 98,054,022 64,119,708 Basic earnings/(loss) per share (pence per share) (0.43p) 1.05p Diluted earnings/(loss) per share (pence per share) (0.43p) 1.04p Reconciliation to adjusted earnings per share: Basic Impact of intangibles amortisation 2.69p 2.50p Impact of non-recurring and exceptional costs 3.51p 1.17p Impact of share-based payments 0.57p 0.57p Adjusted basic earnings per share (pence per share) 6.34p 5.29p Reconciliation to adjusted earnings per share: Diluted1 Impact of intangibles amortisation 2.66p 2.45p Impact of non-recurring and exceptional costs 3.47p 1.15p Impact of share-based payments 0.56p 0.56p Adjusted diluted earnings per share (pence per share) 6.26p 5.20p

1 In 2008, the dilutive impact of options over 1,081,702 shares would have formed part of the dilutive calculation but were not included because of the loss-making position of the Company. However, the dilutive impact of these options (comprising 822,108 share options and 259,594 warrants) still impacts the adjusted dilutive calculation, due to the adjusted profit-making position of the Company.

Concateno plc 42 Annual Report and Accounts 2008 10 Acquisitions During 2007, the Company acquired six companies. Details of finalised fair values in relation to each business combination are presented in note (i) to (vi) below.

(i) Acquisition of Altrix Healthcare plc On 5 February 2007, the Group acquired all the shares in Altrix Healthcare plc (‘Altrix’), based in Warrington, at fair value for £14,846,527 in cash (including acquisition costs and payment for cash acquired). The Company specialises in the provision of drug testing solutions.

From the date of acquisition, Altrix contributed £131,000 of profit after tax to the Group in 2007.

The finalised fair value of net assets acquired was as follows: Altrix Altrix Altrix fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 455 – 455 Intangible assets – 5,045 5,045 Inventories 302 – 302 Trade and other receivables 2,101 – 2,101 Cash and cash equivalents 2,434 – 2,434 Trade and other payables (1,479) (6) (1,485) Deferred tax – (1,514) (1,514) Net identifiable assets and liabilities 3,813 3,525 7,338 Goodwill on acquisition 7,509 Total purchase cost 14,847 Being: Consideration paid in cash 13,615 Cash paid for acquisition expenses 1,232 14,847 Cash acquired (2,434) Net cash outflow in respect of purchase 12,413

Acquisition expenses include £300,000 completion bonus paid to Directors.

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£5,045,000), a holiday accrual at the date of acquisition (£6,000), and recognition of the deferred tax liability relating to intangible assets acquired (£1,514,000).

See Note 11 for details of intangible assets identified on acquisition. The remaining goodwill is chiefly attributable to the value of the customer base and non-contractual customer relationships which do not fulfil the intangible assets recognition criteria under IFRSs, the profitability of the business and the significant synergies expected to arise after acquisition.

(ii) Acquisition of TrichoTech Limited On 31 January 2007, the Group acquired all the shares in TrichoTech Limited (‘TrichoTech’), based in Cardiff, at fair value for £1,337,000 in cash (including acquisition costs), £1,062,500 in shares and £9,012,500 in loan notes. The Company provides laboratory-based hair testing services for recreational drug abuse.

From the date of acquisition, TrichoTech contributed £491,000 of profit after tax to the Group in 2007.

Concateno plc Annual Report and Accounts 2008 43 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

10 Acquisitions continued The finalised fair value of net assets acquired was as follows: TrichoTech TrichoTech TrichoTech fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 577 – 577 Intangible assets – 3,300 3,300 Inventories 39 – 39 Trade and other receivables 698 – 698 Cash and cash equivalents 250 – 250 Interest-bearing loans and borrowings (309) – (309) Trade and other payables (915) (4) (919) Deferred tax (23) (990) (1,013) Net identifiable assets and liabilities 317 2,306 2,623 Goodwill on acquisition 8,789 Total purchase cost 11,412 Consideration paid in shares (817,308 shares at 130p) (1,063) Consideration paid on loan notes (9,012) Payments in cash 1,337 Being: Consideration paid in cash 673 Cash paid for acquisition expenses 664 1,337 Cash acquired (249) Net cash outflow in respect of purchase 1,088

Acquisition expenses include £150,000 completion bonus paid to Directors.

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£3,300,000), a holiday accrual at the date of acquisition (£4,000), and recognition of the deferred tax liability relating to intangible assets acquired (£990,000).

The loan notes were redeemed in December 2007 (£9,012,000).

See Note 11 for details of intangible assets identified on acquisition. The remaining goodwill is chiefly attributable to the profitability of the business, the assembled workforce, its market-leading position in the field of hair testing and the significant synergies expected to arise after acquisition.

(iii) Acquisition of Euromed Limited On 30 March 2007, the Group acquired all the shares in Euromed Limited (‘Euromed’), based in London, at fair value for £8,758,000 in cash (including acquisition costs) and £3,750,000 in shares. The Company provides Point-of-Care testing devices for the detection of drugs of abuse primarily in the criminal justice and rehabilitation sectors.

From the date of acquisition, Euromed contributed £277,000 of profit after tax to the Group in 2007.

The finalised fair value of net assets acquired was as follows: Euromed Euromed Euromed fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 12 – 12 Intangible assets – 6,138 6,138 Inventories 597 (417) 180 Trade and other receivables 572 – 572 Cash and cash equivalents 152 – 152 Trade and other payables (585) – (585) Deferred tax – (1,842) (1,842) Net identifiable assets and liabilities 748 3,879 4,627 Goodwill on acquisition 7,881 Total purchase cost 12,508 Consideration paid in shares (2,586,207 shares at 145p) (3,750) Payments in cash 8,758 Being: Consideration paid in cash 7,750 Cash paid for acquisition expenses 1,008 8,758 Cash acquired (152) Net cash outflow in respect of purchase 8,606

Concateno plc 44 Annual Report and Accounts 2008 10 Acquisitions continued Acquisition expenses include £250,000 completion bonus paid to Directors.

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£6,138,000) an opening provision for the revaluation of stock (£422,000), an amendment to the valuation of stock to bring Euromed in line with Group policy relating to the absorption of relevant overheads in the closing value of stock held (£5,000) and an opening provision for recognition of deferred taxation on intangible assets acquired (£1,842,000).

See Note 11 for details of intangible assets identified on acquisition. The remaining goodwill is chiefly attributable to the profitability of the business, the assembled workforce and the significant synergies expected to arise after acquisition.

(iv) Acquisition of Marconova AB On 22 May 2007, the Group acquired all the shares in Marconova AB (‘Marconova’), based in Goteborg, Sweden, at fair value for £425,000 in cash and £1,000,000 in shares. The Company is a specialist in drug and alcohol testing in the international maritime sector and the Swedish workplace market.

From the date of acquisition, Marconova contributed £121,000 of loss after tax to the Group in 2007.

The finalised fair value of net assets acquired was as follows: Marconova Marconova Marconova fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 19 – 19 Intangible assets – 150 150 Purchased goodwill 804 (804) – Inventories 10 – 10 Trade and other receivables 84 – 84 Trade and other payables (987) – (987) Deferred tax – (45) (45) Net identifiable assets and liabilities (70) (699) (769) Goodwill on acquisition 2,194 Total purchase cost 1,425 Consideration paid in shares (557,725 shares at 179.3p) (1,000) Payments in cash 425 Being: Consideration paid in cash 376 Cash paid for acquisition expenses 49 425 Cash acquired – Net cash outflow in respect of purchase 425

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£150,000), the write-down of own-company goodwill (£804,000) and recognition of the deferred tax liability relating to intangible assets acquired (£45,000).

See Note 11 for details of intangible assets identified on acquisition. The remaining goodwill is chiefly attributable to the value of the customer- base and non-contractual customer relationships which do not fulfil the intangible assets recognition criteria under IFRSs and the significant synergies expected to arise after acquisition.

Concateno plc Annual Report and Accounts 2008 45 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

10 Acquisitions continued (v) Acquisition of CPL International Services Limited On 13 July 2007, the Group acquired all the shares in CPL International Services Limited (‘CPL’), based in Liverpool, at fair value for £795,000 in cash and £84,000 in shares. The Company provides drug testing services in the medico-legal and international maritime sectors.

From the date of acquisition, CPL contributed £28,000 of profit after tax to the Group in 2007.

The finalised fair value of net assets acquired was as follows: CPL CPL CPL fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 282 – 282 Intangible assets – 158 158 Inventories 2 – 2 Trade and other receivables 107 16 123 Cash and cash equivalents 14 – 14 Trade and other payables (37) – (37) Deferred tax – (44) (44) Net identifiable assets and liabilities 368 130 498 Goodwill on acquisition 381 Total purchase cost 879 Consideration paid in shares (50,150 shares at 167.5p) (84) Payments in cash 795 Being: Consideration paid in cash 659 Cash paid for acquisition expenses 136 795 Cash acquired (14) Net cash outflow in respect of purchase 781

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£158,000), and recognition of the deferred tax liability relating to intangible assets acquired (£44,000).

See Note 11 for details of intangible assets identified on acquisition. The goodwill is chiefly attributable to the profitability of the business and the significant synergies expected to arise after acquisition.

Concateno plc 46 Annual Report and Accounts 2008 10 Acquisitions continued (vi) Acquisition of Cozart plc On 4 October 2007, the Group acquired all the shares (issued and to be issued) in Cozart plc (‘Cozart’), based in Abingdon, at fair value for £67,413,000 in cash (including acquisition costs) and £1,778,000 in shares. The Company is a specialist in the field of drugs-of-abuse testing with a portfolio of Laboratory services, Point-of-Care products and Laboratory products to offer its customers (who include those in the workplace, medical and criminal justice markets worldwide).

From the date of acquisition, Cozart contributed £376,000 of profit after tax to the Group in 2007.

The finalised fair value of net assets acquired was as follows: Cozart Cozart Cozart fair value fair value to Book value adjustment the Group £’000 £’000 £’000 Property, plant and equipment 1,912 – 1,912 Capitalised development costs 1,212 – 1,212 Intangible assets acquired – 22,468 22,468 Inventories 2,895 – 2,895 Trade and other receivables 7,089 (65) 7,024 Cash and cash equivalents 2,826 – 2,826 Deferred tax asset 581 – 581 Trade and other payables (6,942) (151) (7,093) Loans and borrowings (3,825) – (3,825) Deferred tax liability – (6,290) (6,290) Net identifiable assets and liabilities 5,748 15,962 21,710 Goodwill on acquisition 47,481 Total purchase cost 69,191 Consideration paid in shares (1,369,013 shares at 130p) (1,778) Payments in cash 67,413 Being: Consideration paid in cash 64,863 Cash paid for acquisition expenses 2,550 67,413 Cash acquired (2,826) Net cash outflow in respect of purchase 64,587

Acquisition expenses include £350,000 completion bonus paid to Directors.

The fair value adjustments above relate to recognition of intangible assets acquired as part of the business combination (£22,468,000), a holiday-pay accrual at the date of acquisition (£21,000), increased bad debt provision at the date of acquisition (£65,000), an adjustment to the valuation of a deferred consideration provision at the date of acquisition (£130,000) and recognition of the deferred tax liability relating to intangible assets acquired (£6,290,000).

See Note 11 for details of intangible assets identified on acquisition. The remaining value of goodwill relates to other intangible assets not identified under IFRS 3 chiefly being the following;

• The value of the customer-base and non-contractual customer relationships which do not fulfil the intangible assets recognition criteria under IFRS 3. • Strategic premium, geographical positioning, market share and market leadership associated with the business. • The contribution of the assembled workforce. • Benefits derived from economies of scale.

Concateno plc Annual Report and Accounts 2008 47 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

11 Goodwill and other intangible fixed assets Development Customer Customer Commercial Patents and Goodwill costs relationships contracts agreements trade marks Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2007 23,440 – 5,793 – – 4,035 33,268 Acquisitions through business combinations 74,498 1,212 12,219 714 6,469 17,860 112,972 Other additions 247 247 At 31 December 2007 and 1 January 2008 97,938 1,459 18,012 714 6,469 21,895 146,487 Adjustments to fair value of prior year acquisitions 397 – – – – – 397 Additions – 1,125 – – – 9 1,134 At 31 December 2008 98,335 2,584 18,012 714 6,469 21,904 148,018 Amortisation At 1 January 2007 – – 56 – – 77 133 Amortisation for the year – 40 962 21 139 1,071 2,233 At 31 December 2007 and 1 January 2008 – 40 1,018 21 139 1,148 2,366 Amortisation for the year – 161 1,361 84 555 1,659 3,820 Impairment – – 71 – – – 71 At 31 December 2008 – 201 2,450 105 694 2,807 6,257

Carrying amounts At 1 January 2007 23,440 – 5,737 – – 3,958 33,135 At 31 December 2007 and 1 January 2008 97,938 1,419 16,994 693 6,330 20,747 144,121 At 31 December 2008 98,335 2,383 15,562 609 5,775 19,097 141,761

Impairment testing for cash-generating units containing goodwill Goodwill arising on a business combination is allocated at acquisition to the cash generating units (‘CGUs’) that are acquired and is denominated in the functional currency of the CGU.

The Group reviews and tests goodwill for impairment on an annual basis, on 31 December each year, or more frequently in the event that there are any indications that it may have been impaired.

The Group compares the carrying amount and the recoverable amount in its testing for impairment. The recoverable amount of the CGU is determined from value-in-use calculations. These calculations include assumptions in respect of forecast selling prices, forecast raw material and other direct costs, forecast exchange rates affecting the currencies in which transactions of the CGU are made, revenue growth rates and the discount rate. Each of these assumptions is included in the detailed plans prepared by management which support the impairment review.

The calculations are based on the actual operating results and the most recent budget and forecast business plan for the three years ending 31 December 2011. A further 14 years of projected cash flows are incorporated using an estimated annual growth rate and a terminal value is used thereafter, where appropriate, which reflects management’s assessment of the long-term average growth rate for the Group’s products and services and the geographies it currently operates in and plans to operate in. This internal work was benchmarked against external market analysis recently carried out which gave additional third-party verification for management’s growth assumptions.

Management estimate discount rates by reference to current market assessments of the time value of money adjusted by the specific risks of the CGU being measured. The discount rates used were also amended according to the conditions relating to each specific business unit operating within that CGU, where relevant. This particularly impacts the Point-of-Care CGU which includes forecast cashflows associated with a range of technologies, some of which are less proven in the market than others, and hence have a higher risk-factor associated with them (as well as a higher growth rate in the early years post-launch).

Growth rates from year four and discount rates applied, by CGU, are summarised in the table below. Within each CGU, the Group offers a range of products and services. The growth rates disclosed include the highest and lowest growth rates forecast within each unit. Volume and pricing assumptions made are a reflection of the latest market-data available and include an increased geographical spread, particularly with regard to new products being launched in the Point-of-Care testing CGU. As mentioned above, this also has been considered in the discount- rate applied to these particular cashflows. Changes to selling prices, raw materials, and other direct costs are based on past experience and management expectations of future market changes. Laboratory Point-of-Care Laboratory Services Testing Products

Growth rate: From year 4: 2008 8 to 0% 10 to 4% 6 to 3% From year 4: 2007 8 to 2% 11 to 4% 6 to 0%

Discount rate (pre-tax): 2008 15.4% 15.4%/25.7% 16.8% 2007 15.6% 15.0%–16.3% 16.0%

Concateno plc 48 Annual Report and Accounts 2008 11 Goodwill and other intangible fixed assets continued Whilst management is confident that its assumptions are appropriate in light of circumstances at the time of review, it is possible that circumstances may change. With the exception of the Laboratory Products CGU, the recoverable amounts calculated on the above basis significantly exceed the carrying values of the cash generating units that includes goodwill and working capital to the extent that the assumptions made would need to change by a significant amount to eliminate the surplus. For the Laboratory Products CGU, an increase of 2% in the post-tax discount rate would lead to an impairment of £1,027,000. However, management are satisfied that both the growth rates and discount rates assumed in this sector are not aggressive and therefore sufficient headroom exists.

The Goodwill by CGUs comprises: 2008 2007 £’000 £’000

Laboratory services 48,798 48,699 Point-of-Care testing 36,631 36,425 Laboratory products 12,906 12,814 98,335 97,938

Recoverability of development costs There are two development projects which make up the ‘development costs’ intangible asset; the Cozart® DDS system and the Cozart-Philips system development project.

The Cozart® DDS system was launched in July 2006 and has been amortised since the commencement of commercial production at that time. There have been no indications that the current carrying value of this asset is impaired.

The Cozart-Philips development project is on-going and commercial production has not yet begun. Accordingly, no amortisation has yet been charged. The carrying amount of this intangible asset is supported by the future cash flows which are forecast to be generated from sale of this product when it is launched. Forecast cashflows from the point of launch of the product are such that the current carrying value of this asset is fully supportable.

The Cozart-Philips project does not meet the definition of a Joint Venture, according to the terms set out in IAS 31, and has therefore not been accounted for as such.

Intangible assets acquired as a result of acquisitions Intangible assets acquired as a result of the acquisitions detailed in Note 10 are summarised below:

Customer Customer Commercial Patents and relationships contracts agreements trademarks Total £’000 £’000 £’000 £’000 £’000 Laboratory services 10,763 – – 10,320 21,083 Point-of-Care testing 5,243 714 6,469 9,448 21,874 Laboratory products 2,006 – – 2,127 4,133 18,012 714 6,469 21,895 47,090 Impairment loss (71) Cumulative Amortisation (including impact of any impairment) (5,985) Net book value at 31 December 2008 41,034

Intangible assets acquired are allocated at acquisition to the CGUs that are acquired and are denominated in the functional currency of the CGU.

The carrying amount of each asset is reviewed at least annually to ensure there are no indications of impairment. An impairment loss would be recognised whenever the carrying amount of the asset or its CGU exceeds its recoverable amount. One asset was found to be impaired due to the loss of a contract in the year to 31 December 2008, accordingly, £71,000 impairment losses (cost of £87,000, amortisation impact £16,000) have been recognised.

Concateno plc Annual Report and Accounts 2008 49 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

12 Property, plant and equipment Land and Plant and buildings machinery Total £’000 £’000 £’000 Cost At 1 January 2007 15 376 391 Acquisitions through business combinations 602 2,645 3,247 Other additions 71 498 569 Disposals (2) (202) (204) At 31 December 2007 and 1 January 2008 686 3,317 4,003 Acquisitions through business combinations – – – Other additions 224 1,430 1,654 Disposals – (45) (45) At 31 December 2008 910 4,702 5,612 Depreciation At 1 January 2007 1 23 24 Depreciation for the year 146 611 757 Disposals – (188) (188) At 31 December 2007 and 1 January 2008 147 446 593 Depreciation for the year 52 1,231 1,283 Impairment loss 90 – 90 Disposals – (45) (45) At 31 December 2008 289 1,632 1,921 Carrying amounts At 1 January 2007 14 353 367 At 31 December 2007 and 1 January 2008 539 2,871 3,410 At 31 December 2008 621 3,070 3,691

Impairment An impairment loss of £90,000 was recognised during the year following building-revaluation carried out. See Note 3.

Leased plant and machinery Included in the above table are assets held under finance leases as follows: 2008 2007 £’000 £’000 Plant and machinery Carrying value 270 490 Depreciation 95 95 Motor vehicles Carrying value 2 10 Depreciation 1 2

Security At 31 December 2008 UK and Spanish-based fixed assets of the Group with a carrying amount of £25,001,000 (2007: £28,750,000) are subject to a registered debenture to secure the term loan (see Note 18).

Concateno plc 50 Annual Report and Accounts 2008 13 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net 2008 2007 2008 2007 2008 2007 £’000 £’000 £’000 £’000 £’000 £’000 Property, plant and equipment (339) (193) 145 96 (194) (97) Intangible assets – – 11,437 12,533 11,437 12,533 Share-based payments (33) (104) – – (33) (104) Other temporary differences 20 (96) – – 20 (96) Derivative contracts (429) – (429) – Tax loss carry forwards (300) (465) – – (300) (465) Tax (assets)/liabilities (1,081) (858) 11,582 12,629 10,501 11,771

Movements in temporary differences have been as follows: Balance Impact Acquired in Balance 1 January Recognised of 2008 Recognised business 31 December 2007 in income rate change in equity combinations 2007 £’000 £’000 £’000 £’000 £’000 £’000 Property, plant and equipment – (114) – – 17 (97) Intangible assets 2,715 (614) (293) – 10,725 12,533 Share-based payments (10) (82) 1 (13) – (104) Other temporary differences – (18) – – (78) (96) Tax loss carry forwards – 577 53 – (1,095) (465) 2,705 (251) (239) (13) 9,569 11,771

Balance Balance 1 January Recognised Recognised Prior year 31 December 2008 in income in equity adjustments 2008 £’000 £’000 £’000 £’000 £’000 Property, plant and equipment – asset (192) 9 – (155) (338) Property, plant and equipment – liability 95 49 144 Intangible assets 12,533 (1,013) – (83) 11,437 Share-based payments (104) 71 – (33) Other temporary difference (96) (40) – 156 20 Derivative contracts – (429) – – (429) Tax loss carry forwards (465) 300 – (135) (300) 11,771 (1,053) – (217) 10,501

At the balance sheet date, the Group has unutilised gross tax losses of approximately £4,720,953 (2007: £4,988,736) potentially available for offset against future taxable profits. A deferred tax asset of £300,412 (2007: £465,104) has been recognised in respect of £1,072,899 (2007: £1,661,086) of gross trading losses. No deferred tax asset has been recognised in respect of the remaining £3,648,054 (2007: £3,327,650) of gross losses, as these are not expected to be recovered in the foreseeable future.

Concateno plc Annual Report and Accounts 2008 51 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

14 Inventories 2008 2007 £’000 £’000 Raw materials and consumables 2,839 2,217 Finished goods and goods for resale 2,159 1,728 Less: provisions against obsolete and excess stock (63) (90) 4,935 3,855

15 Trade and other receivables 2008 2007 £’000 £’000 Trade receivables 12,876 9,577 Other debtors, prepayments and accrued income 1,836 2,242 14,712 11,819

For detail regarding the deferred tax asset, see Note 13.

At 31 December 2008 trade receivables are shown net of allowances for doubtful debts of £1,165,000 (2007: £800,000). The majority of this provision has been made in relation to trading with non-UK Laboratory-services customers (this division having been acquired towards the end of 2007) based on experience of customer’s payment track-record. The Group monitors debtor payment profiles closely and credit policies are in place which aim to reduce the Group’s exposure.

Receivables denominated in currencies other than the functional currency comprise £2,734,000 of trade receivables denominated in US Dollars (2007: £1,748,000) and £404,000 of trade receivables denominated in Euros (2007: £679,000), £44,000 (2007: £nil) denominated in Swedish Krona and £25,000 (2007: £nil) denominated in Australian Dollars.

16 Derivative financial instruments Current Non-current 2008 2007 2008 2007 £’000 £’000 £’000 £’000 Derivatives that are designated and effective as hedging instruments carried at fair value Interest rate swaps – (184) – – Derivatives that are held at fair value through profit or loss (or designated as such) Forward foreign currency contracts – 3 – – Interest rate swaps (1,612) (1,612) (181) – –

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedge transactions that have not yet occurred. £184,000 has been credited to the hedging reserve following re-designation of a previously effective hedge out of equity in the period. This charge (£184,000) together with the change in fair value in respect of this particular interest swap during the year (£1,349,000) has been recognised in the income statement for the year ended 31 December 2008 as an exceptional item. A charge of £82,000 has also been recognised in the income statement for the year ended 31 December 2008 in respect of another derivative not designated as being held at fair value through profit or loss (recognised as a finance cost).

Further details of derivative financial instruments are provided in Note 19.

17 Cash and cash equivalents 2008 2007 £’000 £’000 Cash and cash equivalents 4,292 3,888 Bank overdrafts (2,965) (1,685) Cash and cash equivalents in the statement of cash flows 1,327 2,203

Cash and cash equivalents comprise bank deposits and cash in hand.

Concateno plc 52 Annual Report and Accounts 2008 18 Loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate, liquidity, and foreign currency risk, see Note 19. 2008 2007 £’000 £’000 Current liabilities Current portion of secured bank loans 24,737 3,521 Current portion of other unsecured loans 273 197 Current portion of finance lease liabilities 100 213 25,110 3,931 Non-current liabilities Secured bank loans – 24,737 Convertible loans – 8,343 Other loans 221 352 Finance lease liabilities 105 219 326 33,651 25,436 37,582

Debt costs arising on arranging the debt facilities are being amortised over the life of the loans to which they relate. As at 31 December 2008, the unamortised element amounted to £263,000 (2007: £492,000). The balances disclosed above are net of these unamortised debt costs.

In addition to the 2007 amounts disclosed above, the derivative element of a convertible financial loan instrument was valued at £417,102 at the date of issue. This derivative element did not fully meet the definition of a component of equity and was therefore held as a current liability on the Balance Sheet at the time the loan was in place. This loan was converted during 2008. The carrying value of the loan to which it related is therefore £nil as at 31 December 2008 (2007: £8,343,000).

Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: 31 December 2008 31 December 2007 Nominal Face Carrying Face Carrying Interest rate Year of Value amount value amount Currency % maturity £’000 £’000 £’000 £’000 Secured bank loan GBP 6.211 2008 – – 3,750 3,521 2009 25,001 24,737 25,000 24,737 Convertible loan GBP 12.5 2009 – – 8,720 8,343 Unsecured other loan Euro 0 2008 – – 109 109 2009 273 273 380 380 2010–2012 221 221 60 60 Finance lease liabilities GBP 5.8–8 2009–2012 226 205 432 432 25,721 25,436 3 8,4 51 37,582

1 The effective interest rate changes with the underlying LIBOR rate (being set as three month LIBOR + 3% margin), but is correct as at 31 December 2008. See Note 19 for further details.

The bank loans are secured over the assets of the holding company and all subsidiaries and security be created over shares or quotes in the capital of all companies that fall within the Concateno Group with a carrying amount of £25.0m (2007: £28.8m).

The Group is subject to quarterly covenant reviews by the bank in connection with its secured bank loan. The covenants reviewed are in respect of gross leverage, interest cover, cashflow cover and capital expenditure. There were no breaches during 2008 and no breaches forecast in 2009.

The secured bank loan is disclosed as falling due within one year even though refinancing negotiations are currently under way.

The secured bank loan is repayable in tranches. Repayment dates, as they currently stand, and amounts to be repaid (at face value) are summarised below:

Tranche A Tranche B Tranche C Tranche D Total Repayment Date £’000 £’000 £’000 £’000 £’000 31 Mar 09 500 167 167 625 1,459 30 Jun 09 500 167 167 625 1,459 30 Sep 09 500 167 167 625 1,459 31 Dec 09 5,250 1,750 1,750 11,874 20,624 6,750 2,251 2,251 13,749 25,001

See Financial Review on pages 13 to 15 for further detail on term loan refinancing.

Concateno plc Annual Report and Accounts 2008 53 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

18 Loans and borrowings continued Finance lease liabilities Finance lease liabilities are payable as follows: Minimum Minimum lease lease payments Interest Principal payments Interest Principal 2008 2008 2008 2007 2007 2007 £’000 £’000 £’000 £’000 £’000 £’000 Less than one year 112 12 100 213 24 189 Between one and five years 114 9 105 219 21 198 More than five years – – – – – – 226 21 205 432 45 387

19 Financial instruments The Group’s principal financial instruments comprise bank loans, convertible loan instruments, cash and short-term deposits, the main purpose of which is to provide finance for the Group’s operations. The Group has other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Group also enters into derivative transactions, including principally interest rates collars and forward currency contracts.

The Group’s policies relating to financial risk management are set out in the Directors’ Report on page 20.

Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group operates a credit review process for all potential customers on a case-by-case basis and reviews the aging of debts on a regular basis with reports reviewed by the Board on a monthly basis.

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties with AAA credit rating. The Group does not require collateral in respect of financial assets.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivatives in the balance sheet.

Interest rate risk The Group’s interest rate risk relates primarily to the Group’s long-term debt obligations with a floating interest rate. The Group’s policy is to reduce the interest rate risk by entering into interest rate hedges on at least 70% of its variable rate interest borrowings.

During 2007 the Group entered into an interest rate hedge that caps the variable rate of interest payable on 75% of the Group’s Term loans to LIBOR at 6.5%, with a floor set at 3.73%. If LIBOR falls below 3.73% in any calendar quarter a strike rate of 5.75% is payable on the hedged borrowings in that quarter. The interest rate hedge expires on 31 December 2014 and reduces during that period to match 75% of the scheduled underlying bank debt outstanding at each calendar quarter end. Payments of the interest rate hedges have been set up in order to match the dates on which the interest payments on the underlying borrowings are due for payment.

Note 18 summarises the nature of the Group’s exposure to underlying fixed rate and variable borrowings. The table below shows the value of interest rate hedges on the underlying variable rate borrowings at the end of each financial year. Value of hedge £’000 31 December 2008 18,750 31 December 2009 14,905 31 December 2010 12,655 31 December 2011 10,406 31 December 2012 8,155 31 December 2013 5,905 31 December 2014 –

In May 2008 the Group entered into an interest rate swap instrument over £20m of the Barclays Term loan facility to run from 30 June 2008 to 30 June 2009. The effect of this instrument was to enter into a basis swap to pay interest on the £20m on one-month LIBOR rather than three-month LIBOR. The benefit of this was to reduce the interest charge over the period by approximately 9 basis points.

Based on the gross interest bearing debt and interest rate derivatives existing at 31 December 2008, a parallel upward shift in yield curves of 1% would reduce the Group’s annualised loss before tax by £282,000.

Concateno plc 54 Annual Report and Accounts 2008 19 Financial instruments continued Liquidity risk The Group aims to mitigate liquidity risk by managing the cash generation of its operations. The Group’s liquidity risk arises from timing differences between cash inflows and outflows. The Group manages these risks through a centralised treasury function and through committed credit facilities.

At 31 December the Group had in place a committed credit facility in place of £2m for working capital purposes. This facility was not utilised at 31 December 2008.

Foreign currency risk The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily Euros and US Dollars.

The Group reviews its exposure to foreign currency risk in respect of forecast sales and purchases over the medium term. The Group is in the main internally hedged in respect of inflows and outflows of US Dollars and Euros.

The Group had no foreign exchange hedge instruments in place at 31 December 2008.

Forecast transactions The Group classifies its forward exchange contracts and hedging forecast transactions as cash flow hedges. The net fair value of forward exchange contract at 31 December 2008 was £(1,612,000) (2007: £(181,000)), comprising assets of £nil (2007: £3,000) and liabilities of £1,612,000 (2007: £184,000).

20 Trade and other payables 2008 2007 £’000 £’000 Trade payables 4,734 3,994 Non trade payables 1,778 1,404 Accruals and deferred income 3,217 3,494 9,729 8,892

Payables denominated in currencies other than the functional currency comprise £1,076,000 of trade payables denominated in US Dollars (2007: £576,000), £83,000 trade payables in Euros (2007: £42,000), £84,000 in Japanese Yen (2007: £10,000) and £nil in Swedish Krona (2007: £5,000).

21 Provisions for liabilities and charges Deferred & Rental Onerous Legal Redundancy contingent provision Lease & Advisory provision consideration Total £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2007 – – – – – – Acquired in a business combination 705 – 165 – 1,425 2,295 Provisions used during the period (25) – – – – (25) At 31 December 2007 and 1 January 2008 680 – 165 – 1,425 2,270 Provisions made during the period – 445 563 129 – 1,137 Provisions used during the period (101) (63) – – (1,349) (1,513) At 31 December 2008 579 382 728 129 76 1,894 Current 101 86 728 129 76 1,120 Non-current 478 296 – – – 774 At 31 December 2008 579 382 728 129 76 1,894

Rental provision On the acquisition of Cozart plc, a provision for £705,000 was made in respect of the spreading of rental costs on one of the Group’s buildings. This provision will be released over the remaining life of the building’s operating lease (until 2014).

Onerous lease provision As part of the integration exercise undertaken during the year, the Group vacated a number of properties. A provision of £382,000 (2007: £nil) has therefore been made for the remaining duration of the lease agreement in relation to the portion of this property which remains unused and un-let (£41,000 until 2011 with the remainder until 2014).

Legal and Advisory A provision of £728,000 (2007: £165,000) has been made for the best estimate of costs and advisory costs expected to be incurred in relation to various enquiries which had not been concluded at the year-end.

Redundancy provision Five redundancies were announced prior to the end of 2008 as a result of site closure and team restructuring in the UK. A provision of £129,000 (2007: £nil) has been booked in relation to the cost of these redundancies.

Concateno plc Annual Report and Accounts 2008 55 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

21 Provisions for liabilities and charges continued Deferred consideration In 2007, £1,025,000 was provided for in relation to deferred consideration which is payable to the vendors of Spinreact SA in September 2008. This was settled in the period. Spinreact is a subsidiary of Cozart plc who Concateno acquired during 2007.

Contingent consideration £76,000 (2007: £400,000) is expected to become payable to the vendors of Nemesis Scientific Limited in March 2008. There are performance conditions attached to the award of this deferred consideration. Management believe that these performance conditions will be met and, therefore, that the whole of the deferred consideration will fall due.

22 Capital and reserves Share Share premium Hedging Merger Translation Retained capital account reserve reserve reserve earnings Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2007 2,794 20,008 – 706 – (1,252) 22,256 Issue of ordinary shares 6,722 73,233 – 7,138 – (4,381) 82,712 Cost of share issue – (3,488) – – – – (3,488) Exercise of share options 14 122 – – – – 136 Share-based payment in respect of employee options – – – – – 439 439 Share-based payment in respect of third-party warrant – – – – – 354 354 Total recognised income and expense – – (184) – 298 665 779 At 31 December 2007 and 1 January 2008 9,530 89,875 (184) 7,844 298 (4,175) 103,188 Issue of ordinary shares 15 185 – – – – 200 Conversion of loan 1,059 9,011 – – – – 10,070 Exercise of share options 10 75 – – – – 85 Share-based payments in respect of employee options – – – – – 555 555 Total recognised income and expense – – 184 – 2,162 (424) 1,922 At 31 December 2008 10,614 99,146 – 7,844 2,460 (4,044) 116,020

Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedge transactions that have not yet occurred.

Merger reserve The merger reserve contains the premium on shares issued as consideration for business combinations during the period.

Translation reserve The translations reserve comprises all foreign currency differences arising from the translation of the financial statement of foreign operations.

2008 2007 £’000 £’000 Authorised share capital 150,050,000 ordinary shares of £0.10 each (2007: 150,050,000 shares) 15,005 15,005 Allotted, called up and fully paid 106,139,707 ordinary shares of £0.10 each (2007: 95,299,415 shares) 10,614 9,530

During the year the following ordinary shares of £0.10 were issued by the Company in respect of share options:

Total nominal Total share Total Number of value premium consideration shares £’000 £’000 £’000 Exercise of share options 102,277 10 75 85

23 Employee benefits Defined contribution plans The Group operates defined contribution retirement benefit plans for all qualifying employees. The assets of the scheme are held separately from those of the Group. Contributions of £48,000 (2007: £15,000) were outstanding at the end of the year. The charge to the income statement representing the contribution payable by the Group was £381,000 (2007: £177,000).

Concateno plc 56 Annual Report and Accounts 2008 24 Share options and warrants Share options The Group operates an Enterprise Management Incentive (‘EMI’) share option scheme and an Employee Benefit Trust Incentive Scheme (‘EBT’) as a means of encouraging ownership and aligning interests of staff and external shareholders. Share options are granted at the discretion of the Remuneration Committee taking into account the need to motivate, retain and recruit high calibre employees. Share options are granted at the closing mid-market value of the Company’s ordinary shares on the day prior to grant, or where the Remuneration Committee consider that the share options are issued further to an acquisition event they are granted at the share price pertaining to that acquisition event.

Options have been granted over £0.10 ordinary shares as follows: EMI EBT Number Number At 31 December 2007 1,137,250 2,537,759 Granted during the year 622,116 2,352,884 Exercised during the year ` (68,027) – Lapsed during the year (204,081) (659,864) At 31 December 2008 1,487,258 4,230,779

As at 31 December 2008, the outstanding share options, which include the share options granted to Directors as stated in the Directors’ Remuneration Report, are shown below. At At 1 January Options Options Options 31 Dec 2008 granted exercised lapsed 2008 Date Exercise Exercise Expiry Class Number Number Number Number Number granted price (p) date date Enterprise Management Incentive share option (10p ordinary shares): A 262,498 – – – 262,498 07/11/2006 85 07/11/2009 07/11/2016 B 262,498 – – – 262,498 07/11/2006 85 07/11/2009 07/11/2016 C 306,127 – 34,014 102,042 170,071 05/04/2007 100–145 05/04/2010 05/04/2017 C – 299,805 – – 299,805 21/01/2008 130 21/01/2011 21/01/2018 C – 11,250 – – 11,250 12/06/2008 130 12/06/2011 12/06/2018 D 306,127 – 34,013 102,039 170,075 05/04/2007 100–145 05/04/2010 05/04/2017 D – 299,811 – – 299,811 21/01/2008 130 21/01/2011 21/01/2018 D – 11,250 – – 11,250 12/06/2008 130 12/06/2011 11/06/2018 Total 1,137,250 622,116 68,027 204,081 1,487,258 Options issued to SG Hambros Trust Company (Channel Islands) Limited, as trustee of a trust of which employees and certain of their relatives are potential beneficiaries, holds the following options under the Employee Benefit Trust Incentive Scheme: A 900,000 – – – 900,000 06/11/2006 86 06/11/2009 06/11/2016 B 900,002 – – – 900,002 06/11/2006 86 06/11/2009 06/11/2013 C 368,879 – – 279,931 88,948 05/04/2007 147 05/04/2010 05/04/2014 D 368,878 – - 279,933 88,945 05/04/2007 147 05/04/2010 05/04/2014 E – 1,176,442 – 50,000 1,126,442 12/06/2008 142 12/06/2011 12/06/2015 F – 1,176,442 – 50,000 1,126,442 12/06/2008 142 12/06/2011 12/06/2015 2,537,759 2,352,884 – 659,864 4,230,779

The weighted average share price at the date of exercise for options exercised during the year was 146p (2007: 120p).

There are certain performance criteria to be met before share options are exercisable:

EMI Option classes A, C and E are exercisable after holders satisfy a period of three years continuous service from the date of the grant of the option.

EMI Option class B and EBT Class B options are exercisable after holders or employees beneficiaries satisfy a period of three years continuous service, subject to the 30 day average mid market share price of an ordinary share being equal to, or greater than, 133% of the placing price of shares at 6 November (acquisition of Medscreen) and before the tenth anniversary of that date. The placing price of shares on 6 November 2006 was 85p.

EMI Class D, EBT Class D and EBT Class F options are exercisable after holders satisfy a period of three years continuous service, subject to the 30 day average mid market share price of an ordinary share being equal to, or greater than, 200p at any time during the exercise period.

The shares issued to the Employee Benefit Trust will be held on the following terms:

In the event that there is a Change of Control, as defined in the Share Plan and generally subject to the Rules of the Plan as to Vesting and when Shares Vest, prior to the seventh anniversary of the date of Acquisition of the Shares, the Shares shall Vest as follows:

(i) If the Exit Price is £2.75 or more the Shares shall Vest in full; (ii) If the Exit Price is £2.50 or more but less than £2.75 the Shares shall Vest as to three-quarters; (iii) If the Exit Price is £2.25 or more but less than £2.50 the Shares shall Vest as to half; (iv) If the Exit Price is below £2.25 then no Shares shall Vest.

The above conditions are based on the performance of a Share price at a Change of Control and shall constitute the Performance Condition.

Concateno plc Annual Report and Accounts 2008 57 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

24 Share options and warrants continued The Exit Price is the value per share to be obtained by a holder as a result of the Change of Control and as calculated by the Directors of the Company and communicated to the Trustee. The Trustee shall be entitled to rely on the Director’s Exit Price. In the event there is a reorganisation etc. involving the Company which, in the opinion of the Directors, renders the hurdle Exit Prices of £2.25, £2.50 and £2.75 inappropriate for the purposes of Vesting, then the Directors shall fairly adjust the hurdle Exit Prices so that the Performance Condition, in terms of achievability, remains constant.

EMI and EBT Option assumptions The options pricing model used was the binomial model. The inputs to this model were:

Vesting period (years) 3.0 Expected volatility 30% Option life (years) 7 Expected life (years) 3 Risk free rate 5.25%/4.60% Expected dividends expressed as dividend yield 0%

Options issued to employees under EMI Scheme

Share price Exercise Shares Vesting Expected Grant at grant price at Number of under option Fair period share price Expected Risk-free Class date date (p) grant date (p) employees at grant value (p) (years) volatility (%) life rate (%) A 07/11/2006 85.0 85.0 9 262,498 28.2 3.00 30 3 5.25 B 07/11/2006 85.0 85.0 9 262,498 28.2 3.00 30 3 5.25 C – Altrix Tranche 05/04/2007 147.0 100.0 2 68,027 64.2 3.00 30 3 4.60 C – TrichoTech Tranche 05/04/2007 147.0 130.0 3 102,043 42.6 3.00 30 3 4.60 C – Euromed Tranche 05/04/2007 147.0 145.0 4 136,057 42.2 3.00 30 3 4.60 C – Cozart Tranche 21/01/2008 115.5 130.0 10 299,805 26.0 3.00 30 3 4.53 C – Cozart Tranche 12/06/2008 147.5 130.0 3 11,250 49.9 3.00 30 3 5.06 D – Altrix Tranche 05/04/2007 147.0 100.0 2 68,027 64.2 3.00 30 3 4.60 D – TrichoTech Tranche 05/04/2007 147.0 130.0 3 102,043 42.6 3.00 30 3 4.60 D – Euromed Tranche 05/04/2007 147.0 145.0 4 136,057 42.2 3.00 30 3 4.60 D – Cozart Tranche 05/04/2007 115.5 130.0 10 299,811 26.0 3.00 30 3 4.53 D – Cozart Tranche 05/04/2007 147.5 130.0 3 11,250 49.9 3.00 30 3 5.06

Options issued to SG Hambros Trust Company (Channel Islands) Limited, as trustee of a trust of which employees and certain of their relatives are potential beneficiaries, holds the following options under EBT Scheme

Share price Exercise Shares Vesting Expected Grant at grant price at Number of under option Fair period share price Expected Risk-free Class date date (p) grant date (p) employees at grant value (p) (years) volatility (%) life rate (%) A 06/11/2006 86.0 86.0 4 900,000 28.7 3.00 30 3 5.25 B 06/11/2006 86.0 86.0 4 900,002 28.2 3.00 30 3 5.25 C 05/04/2007 147.0 147.0 9 368,879 41.4 3.00 30 3 4.60 D 05/04/2007 147.0 147.0 9 368,878 41.4 3.00 30 3 4.60 E 12/06/2008 142.0 142.0 15 1,176,442 44.7 3.00 30 3 5.06 F 12/06/2008 142.0 142.0 15 1,176,442 44.7 3.00 30 3 5.06

The Group recognised total expenses of £555,000 (2007: £439,000) related to equity-settled share-based payment transactions during the year.

Warrants Under a warrant instrument dated 26 October 2006 Marwyn Neptune Fund is entitled to subscribe for 1,397,059 shares in Concateno. The exercise price of the warrants is 85p, the placing price at the time of the Medscreen acquisition.

The first 50% of the Marwyn Warrant is exercisable at any time after the date of grant subject to the mid market price of an ordinary share of Concateno being equal to or greater than 125% of the Medscreen Placing Price at any date after 6 November 2006. Accordingly these warrants became exercisable on 15 December 2006.

The second 50% of the Marwyn Warrant will be exercisable at any time after the date of grant subject to the mid market price of an ordinary share of Concateno being equal to or greater than 150% of the Medscreen Placing Price at any date after 6 November 2006. Accordingly these warrants became exercisable on 11 January 2007.

The Marwyn Warrant is also exercisable on a takeover offer being made for the whole of the issued share capital of Concateno (or a general offer in respect of one class of Concateno`s shares is made) and control of Concateno is thereby obtained. The Marwyn Warrant is freely transferable by Marwyn Neptune Fund and is unlisted.

Concateno plc 58 Annual Report and Accounts 2008 24 Share options and warrants continued In the event of any variation in the share capital of Concateno, auditors can be instructed to determine what adjustment, if any, should be made to the number and nominal value of the shares subject to the warrant and/or the exercise price as fairly reflects that change in Concateno’s share capital.

Warrant option valuation assumptions The options pricing model used was the binomial model. The inputs to this model were:

Vesting period (years) 1.0 Expected volatility 30% Option life (years) 7 Expected life (years) 3 Risk free rate 5.25% Expected dividends expressed as dividend yield 0%

25 Operating leases Total lease commitments under non-cancellable operating leases are as follows: 2008 2007 Land and Plant and Land and Plant and buildings equipment buildings equipment £’000 £’000 £’000 £’000 Less than one year 959 94 1,001 89 Between one and five years 3,725 218 3,722 264 More than five years 713 – 1,625 – 5,397 312 6,348 353

The Group leases a number of warehouse and factory facilities under operating leases. The leases run for an average of three years with the longest lease running until 2014.

Three operating companies within the Group have operating leases in place for items of plant and equipment. This equipment is used in the three main laboratories across the UK and production facilities in Abingdon.

During the year ended 31 December 2008, £1,128,000 (2007: £271,000) was recognised as an expense in the income statement in respect of operating leases.

26 Capital commitments and contingencies Capital commitments had been made in respect of laboratory services equipment for the Cardiff site (£200,000).

There are no contingencies to note.

27 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Marwyn Partners Ltd, Marwyn Investment Management LLP and Marwyn Capital LLP were deemed to be related parties of Concateno plc during 2007 by virtue of a common Director, J Corsellis. Marwyn 10 Buckingham Street LLP is deemed to be a related party by virtue of two common partners, K Tozzi and J Corsellis. 2008 2007 Amounts Amounts Provision of due to Provision of due to goods and related goods and related services parties services parties £ £ £ £ Marwyn Partners Ltd – – 5,000 – Marwyn Capital LLP 189,996 15,498 1,846,000 32,000 Marwyn 10 Buckingham Street LLP 79,992 120,958 98,442 13,000 269,988 136,456 1,949,442 45,000

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

The Group has a corporate advisory agreement with Marwyn Capital LLP. Under the terms of the appointment, Marwyn Capital LLP provided general strategic and corporate financial services to the Group for a fixed monthly fee of £15,000 plus expenses. This agreement was terminated on 31 May 2008. Subsequent to the termination of this agreement, Concateno entered into an appointment with Marwyn Capital LLP to provide strategic and financial advice for the strategic review of the business on 1 June 2008. The Group also has an arrangement with Marwyn 10 Buckingham Street LLP for the provision of accommodation and associated back office support services for a fee of

Concateno plc Annual Report and Accounts 2008 59 >> Notes to the Consolidated Financial Statements continued For the year ended 31 December 2008

27 Related party transactions continued £6,666 per month. J Corsellis is a Director of the named Marwyn entities and a Non-Executive Director of Concateno. In relation to the possible sale of Concateno plc, J Corsellis, V Bolger and C Hall, all employees of Marwyn Investment Management LLP, have a Chinese wall in place with other employees of Marwyn Investment Management LLP, whereby they will not disclose details of the transaction to other employees.

Marwyn Neptune Fund LP and Marwyn Ventures 1 LP, shareholders in the Company, are managed on an arms length basis by Marwyn Investment Management LLP. Marwyn Neptune Fund and Marwyn Ventures 1 LP (a fund managed by Marwyn Investment Management LLP) held a total of 29,174,852 ordinary shares in the Company as at 17 March 2009. Under the terms of an instrument dated 1 November 2006 Marwyn Neptune Fund was granted a warrant to subscribe for 1,397,058 new ordinary shares in the Company at 85p (the ‘Marwyn Warrant’).

C Hand is engaged by the Group as a Non-Executive Director under the terms of a letter of appointment. Under the terms of the same letter of appointment he is entitled to remuneration of £1,000 per working day for any special project work agreed in relation to the Philips collaboration. In 2008, he received remuneration of £41,500 (2007: £11,666) for special project work. In February 2009, C Hand entered into an agreement with the Company to provide all special project work through Abingdon Health Ltd, a company of which C Hand is a Director and major shareholder.

V Murria has a related party holding of 100,000 ordinary shares as part of a pension fund through her spouse.

V Murria is also a related party through Marwyn Investment Management LLP through the investment by Marwyn Neptune Fund in Advanced Computer Software plc of which V Murria is the Chief Executive Officer.

Concateno plc entered into a lease on 10 Buckingham Street, London which is a property owned by Marwyn 10 Buckingham Street LLP, of which K Tozzi and J Corsellis are partners.

There were no other transactions or contracts with related parties.

Transactions with the Directors of the Company are disclosed in the Remuneration Report on pages 24 to 25.

28 Group entities Details of the subsidiary companies of Concateno plc, all of which have been consolidated as at 31 December 2008, are as follows:

Percentage of equity shares held (%) Subsidiary undertaking Country of incorporation Principal activity 2008 2007 Medscreen Holding Limited1 United Kingdom Holding company 100 100 Medscreen Limited United Kingdom Sale of medical diagnostic services 100 100 Altrix Healthcare Limited1 United Kingdom Sale of medical diagnostic products and services 100 100 TrichoTech Limited1 United Kingdom Sale of medical diagnostic services 100 100 Euromed Limited1 United Kingdom Sale of medical diagnostic products 100 100 Marconova AB1 Sweden Sale of medical diagnostic services 100 100 CPL International Services Limited1 United Kingdom Sale of medical diagnostic services 100 100 Cozart Limited1 United Kingdom Holding company 100 100 Cozart Bioscience Limited United Kingdom Manufacture, sale and development of medical diagnostic products and services 100 100 Cozart Italia srl Italy Sale of medical diagnostic products and services 100 100 Cozart Bioscience Inc. United States of America Dormant 100 100 Medib Skandinavien AB Sweden Dormant 100 100 Spinreact SA Spain Manufacture, sale and development of medical diagnostic products and services 100 100 Cozart International sarl France Sale of medical diagnostic products and services 100 100 HL Scandinavia AB Sweden Sale of medical diagnostic products and services 100 100 Nemesis Scientific Limited United Kingdom Sale of medical diagnostic products and services 100 100 Concateno Australia Pty Australia Dormant 100 N/A

1 Held directly by Concateno plc.

29 Subsequent events There are no subsequent events to note.

Concateno plc 60 Annual Report and Accounts 2008 >> Company Balance Sheet As at 31 December 2008

2008 2007 Notes £’000 £’000 Fixed assets Investments (C3) 136,311 135,033 Intangible assets (C4) 8 – Tangible assets (C5) 94 104 136,413 135,137 Current assets Debtors (C6) 6,191 8,755 Cash at bank and in hand 88 691 6,279 9,446 Creditors: amounts falling due within one year (C7) (34,880) (12,505) Net current liabilities (28,601) (3,059) Total assets less current liabilities 107,812 132,078 Creditors: amounts falling due after more than one year (C7) – (33,458) Net assets 107,812 98,620 Capital and reserves Called up share capital (C8) 10,614 9,530 Share premium account (C9) 99,146 89,875 Merger Reserve (C9) 7,844 7,8 4 4 Profit and loss account (C9) (9,792) (8,629) Equity shareholders’ funds 107,812 98,620

The financial statements were approved by the Board of Directors and authorised for issue on 30 March 2009. They were signed on its behalf by:

Fiona Begley Neil Elton Chief Executive Officer Finance Director

30 March 2009 30 March 2009

The accompanying notes are an integral part of this balance sheet.

Concateno plc Annual Report and Accounts 2008 61 >> Notes to the Company Balance Sheet

C1 Accounting policies Basis of Preparation The separate financial statements of the Company are presented as required by the Companies Act 1985. They have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards and law.

The Company took advantage of the exemption in s230 of the Companies Act 1985 not to present its individual profit and loss account and related notes that form part of these approved financial statements.

The principal accounting policies are summarised below and as part of the notes to the Company Balance Sheet. They have all been applied consistently throughout the year and the preceding year.

Investments Fixed Asset Investments in subsidiaries are shown at cost less any provision for impairment.

For investments in subsidiaries acquired for consideration, including the issue of shares qualifying for merger relief, cost is measured by reference to the nominal value only of the shares issued.

Debt issue costs In accordance with FRS 25 the separately identifiable costs on the issue of debt instruments are capitalised and disclosed within creditors as a deduction from the related debt. Issue costs are amortised over the life of the debt instruments to which they relate and the associated charge to the profit and loss account is included as an interest expense.

Pension costs The Company operates defined contribution pension schemes. The amount charged against profits represents the contributions payable to the scheme in respect of the account period. The assets of the schemes are held separately from those of the Company.

Taxation The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.

Employee share schemes The fair value of options granted is recognised as an expense together with corresponding increase in equity. The fair value is recognised at grant date and spread over the period employees become unconditionally entitled to the option. Fair value is based on market value using a binomial option-pricing model. Non market vesting conditions are included in the assumption concerning the number of options that are expected to become exercisable. At each balance sheet date, the Company revises its estimate of the number of options that are expected to vest for changes in non-market conditions.

Foreign currencies The functional currency of the Company is Pounds Sterling. Transactions denominated in foreign currencies are translated into Pounds Sterling at the rate of exchange on the day the transaction occurs. Monetary assets and liability, which are denominated in a foreign currency, are translated at the rate of exchange ruling at the balance sheet date, and the gains and losses on translation are included in the profit and loss account.

C2 Staff numbers and costs The average monthly number of employees (including Directors) for the Group during the year, analysed by category, was: 2008 2007 Number Number Finance and Administration 10 5

At the end of the year there were nine members of staff in Concateno plc.

Their aggregate remuneration comprised: 2008 2007 £’000 £’000 Wages and salaries 948 1,825 Share based payments 235 149 Social security costs 123 178 Other pension costs 121 76 1,427 2,228

Concateno plc 62 Annual Report and Accounts 2008 C3 Investments The Company has investments in the following subsidiaries which principally affected the profits or net assets of the Group:

Please see Note 28 for a complete listing of subsidiaries and holdings.

Cost £’000 At 1 January 2008 135,033 Additions 1,278 At 31 December 2008 136,311

C4 Intangible assets Total £’000 Cost At 1 January 2008 – Additions 8 At 31 December 2008 8 Amortisation At 1 January 2008 – Amortisation for the year – At 31 December 2008 – Carrying amounts At 1 January 2008 8 At 31 December 2008 8

C5 Tangible assets Plant and machinery Total £’000 £’000 Cost At 1 January 2008 109 109 Additions 3 3 At 31 December 2008 112 112 Depreciation At 1 January 2008 5 5 Depreciation for the year 13 13 At 31 December 2008 18 18 Carrying amounts At 1 January 2008 104 104 At 31 December 2008 94 94

C6 Debtors 2008 2007 £’000 £’000 Amounts owed by Group undertakings 5,857 7,9 67 Other debtors, prepayments and accrued income 269 627 Deferred tax asset 65 161 6,191 8,755

C7 Creditors Creditors: amounts falling due within one year 2008 2007 £’000 £’000 Bank loans and overdrafts 27,701 5,206 Trade creditors 262 1,142 Amounts owed to Group undertakings 6,408 5,464 Accruals and deferred income 509 693 34,880 12,505

Concateno plc Annual Report and Accounts 2008 63 >> Notes to the Company Balance Sheet continued

C7 Creditors continued Creditors: amounts falling due after more than one year 2008 2007 £’000 £’000 Bank loans – 24,738 Other loans* – 8,720 – 33,458

Debt costs arising on arranging the bank loans above are being amortised over the life of the loans to which they relate. As at 31 December 2008, the unamortised element amounted to £263,000 (2007: £492,000). The balances disclosed above are net of these unamortised debt costs.

Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: 31 December 2008 31 December 2007 Nominal Face Carrying Face Carrying interest rate Year of Value amount value amount Currency % maturity £’000 £’000 £’000 £’000 Secured bank loan GBP 6.21* 2008 – – 3,750 3,521 2009 25,001 24,737 25,000 24,738 Convertible loan GBP 12.5 2009 – – 8,720 8,720 25,001 24,737 37,470 3 6,979

* The effective interest rate changes with the underlying LIBOR rate (being set as three month LIBOR + 3% margin), but is correct as at 31 December 2008. See Note 19 for further details.

The bank loans are secured over the assets of the holding company and all subsidiaries and security be created over shares or quotes in the capital of all companies that fall within the Concateno Group with a carrying amount of £25.0m (2007: £28.8m).

The secured bank loan is disclosed as falling due within one year even though refinancing negotiations are currently underway. The full repayment profile, by tranche, of the secured bank loan is detailed in Note 18 to the Consolidated Group accounts.

See Financial Review on pages 13 to 15 for further detail on term loan refinancing.

C8 Called-up share capital 2008 2007 £’000 £’000 Authorised share capital: 150,050,000 ordinary shares of £0.10 each (2007: 150,050,000 shares) 15,005 15,005 Allotted, called up and fully paid 106,139,707 ordinary shares of £0.10 each (2007: 95,299,415 shares) 10,614 9,530

C9 Reserves Share Profit Premium Merger and Loss Account Reserve Account Total £’000 £’000 £’000 £’000 Balance at 1 January 2008 89,875 7,844 (8,629) 89,090 Premium arising on issue of ordinary shares 185 – – 185 Conversion of loans 9,011 – – 9,011 Exercise of share options 75 – – 75 Dividends receivable – – 3,580 3,580 Share-based payment regarding employee options – – 253 253 Loss for the financial year – – (4,996) (4,996) At 31 December 2008 99,146 7,844 (9,792) 97,198

Concateno plc 64 Annual Report and Accounts 2008 >> Advisers Contents

01 Highlights 26 Statement of Directors’ Responsibilities 02 Group overview – our products and services 27 Independent Auditors’ Report 04 Group overview – our geographical reach 28 Consolidated Income Statement 06 Group overview – the markets we operate in 28 Consolidated Statement of Recognised Income 08 Chairman’s Statement and Expense 10 Chief Executive Officer’s Review 29 Consolidated Balance Sheet 13 Financial Review 30 Consolidated Cash Flow Statement Registered Office Principal Bankers 16 Board of Directors 31 Notes to the Consolidated Financial Statements Concateno plc Barclays Bank plc 17 Financial Statements index 61 Company Balance Sheet 10 Buckingham Street Head Office Branch 18 Directors’ Report 62 Notes to the Company Balance Sheet London 1 Churchill Place 21 Corporate Governance Report 65 Advisers 24 Directors’ Remuneration Report WC2N 6DF London E14 5HP Registered Number 05396234 England and Wales Public Relations Advisers Concateno is a global provider of drug and alcohol testing Financial Dynamics Nominated Adviser and Broker Holborn Gate and related services as well as a manufacturer of clinical Collins Stewart (Europe) Limited 26 Southampton Buildings diagnostic products. 9th Floor London 88 Wood Street WC2A 1PB London Drug and Alcohol abuse is a growing problem in society. EC2V 7QR Company Secretary Rowena Nixon Concateno is at the forefront of this issue, working with Joint Brokers 10 Buckingham Street SingerCapital Markets Limited London governments, employers and healthcare and law One Hanover Street WC2N 6DF professionals to help reduce the impact of this problem. London W1S 1AX Registrars Our expertise is unmatched and our staff are passionate Capita Registrars about working with clients to identify the best possible Evolution Securities Limited The Registry 100 Wood Street 34 Beckenham Road solutions for them. London EC2V 7AN Beckenham Kent Solicitors to the Company BR3 4TU Following the successful integration of our subsidiary Jones Day 21 Tudor Street Patent Agents businesses, Concateno can now provide the optimal type London Marks and Clerk of drug testing in any biological sample. EC4A 0DJ 4220 Nash Court Oxford Business Park South Auditors Oxford OX4 2RU KPMG Audit Plc Building on our expertise in Europe the Company is now 1 Forest Gate poised to both expand geographically and to develop new Brighton Road Crawley market sectors. RH11 9PT

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Annual Report and Accounts 2008 Concateno plc Annual Report and Accounts 2008 Accounts and Report Annual

Linking it all together

Concateno plc 10 Buckingham Street London WC2N 6DF

T +44 20 7004 2800 F +44 20 7004 2801 E [email protected] www.concateno.com