THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you should immediately seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent adviser who is authorised under the Financial Services and Markets Act 2000 (as amended) (“FSMA”) if you are in the United Kingdom, or, if outside the United Kingdom, from another appropriately authorised independent adviser. This document has been drawn up to comply with the requirements of the NEX Exchange Growth Market – Rules for Issuers (“NEX Exchange Rules”) and has been prepared in connection with the proposed application for admission of Ordinary Shares by Proton Partners International Limited (“Company”). This document does not constitute an offer to the public within the meaning of sections 85 and 102B of FSMA. This document is not an approved prospectus for the purposes of and as defined in section 85 of FSMA, it has not been prepared in accordance with the Prospectus Rules published by the Financial Conduct Authority (“FCA”) and its contents have not been approved by the FCA or any other authority which could be a competent authority for the purposes of the Prospectus Directive. Further, the contents of this document have not been approved by an authorised person for the purposes of section 21 of FSMA. The Directors of the Company, whose names are set out on page 6 of this document (each, a “Director” and collectively, the “Directors”), accept full responsibility collectively and individually for the information contained in this document including the Company’s compliance with the NEX Exchange Rules. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and there is no other material information the omission of which is likely to affect the import of such information. The NEX Exchange Growth Market, which is operated by NEX Exchange Limited (“NEX Exchange”), a Recognised Investment Exchange, is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. It is not classified as a Regulated Market under EU financial services law and NEX Exchange Growth Market securities are not admitted to the Official List of the United Kingdom Listing Authority. Investment in an unlisted company is speculative and involves a higher degree of risk than an investment in a listed company. The value of investments can go down as well as up and investors may not get back the full amount originally invested. An investment should therefore only be considered by those persons who are prepared to sustain a loss on their investment. A prospective investor should be aware of the risks of investing in NEX Exchange Growth Market securities and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser authorised under the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and other securities. Proton Partners International Limited is required by NEX Exchange to appoint a NEX Exchange Corporate Adviser to apply on its behalf for admission to the NEX Exchange Growth Market and must retain a NEX Exchange Corporate Adviser at all times. The requirements for a NEX Exchange Corporate Adviser are set out in the Corporate Adviser Handbook and the NEX Exchange Corporate Adviser is required to make a declaration to NEX Exchange in the form prescribed by Appendix B of the Corporate Adviser Handbook. This document has not been examined or approved by NEX Exchange or the FCA. The whole of this document should be read. Your attention is drawn in particular to the risk factors set out in Part 2 of this document. All statements regarding the Company and its subsidiaries (the “Group”) should be read in light of these risk factors.
Proton Partners International Limited (Incorporated and registered in England and Wales with registered number 09420705) Admission to trading on NEX Exchange Grant Thornton UK LLP
NEX Exchange Corporate Adviser
Grant Thornton UK LLP (“Grant Thornton”), which is authorised and regulated in the United Kingdom by the FCA, is the Company’s NEX Exchange Corporate Adviser for the purposes of this Admission document and Admission. Grant Thornton has not made its own enquiries except as to matters which have come to its attention and on which it considered it necessary to satisfy itself and accepts no liability whatsoever for the accuracy of any information or opinions contained in this document, or for the omission of any material information, for which the Directors are solely responsible. Grant Thornton is acting for the Company and no one else in relation to the matters discussed in this document and will not be responsible to anyone other than the Company for providing the protections afforded to Grant Thornton’s clients or for providing advice to any other person on the content of this document. Copies of the document will be available free of charge during normal business hours on any day (except Saturdays, Sundays and public holidays) at the registered offices of the Company and the offices of Grant Thornton at 30 Finsbury Square, London, EC2A 1AG for one month from Admission. This document is also available on the Company’s website, www.proton int.com IMPORTANT INFORMATION
General This document does not constitute an offer to sell, or the solicitation of an offer to buy or subscribe for, securities in any jurisdiction in which such offer or solicitation is unlawful and, in particular, is not for publication or distribution in or into the United States, Canada, Australia, New Zealand, South Africa or Japan, nor in any country or territory where to do so may contravene local securities laws or regulations. The distribution of this document in other jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions. The Ordinary Shares have not been and will not be registered under the US Securities Act 1933 (as amended) nor under the applicable securities laws of any state of the United States or any province or territory of Canada, Australia, New Zealand, South Africa or Japan. Accordingly, the Ordinary Shares may not be offered or sold directly or indirectly in or into the United States, Canada, Australia, New Zealand, South Africa, Japan or to any resident of the United States, Canada, Australia, New Zealand, South Africa or Japan. No public offering of securities is being made in the United States. The Ordinary Shares have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.
Holding Ordinary Shares may have implications for overseas shareholders under the laws of the relevant overseas jurisdictions. Overseas investors should inform themselves about and observe any applicable legal requirements. It is the responsibility of each overseas shareholder to satisfy himself as to the full observance of the laws of the relevant jurisdiction, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.
Investors should rely only on the information in this document. No person has been authorised to give any information or to make any representations other than those contained in this document and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Company, the Directors or Grant Thornton. No representation or warranty, express or implied, is made by Grant Thornton as to the accuracy or completeness of such information, and nothing contained in this document is, or shall be relied upon as, a promise or representation by Grant Thornton as to the past, present or future. Neither the delivery of this document nor any sale made under this document shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group since the date hereof or that the information contained herein is correct as of any time subsequent to the earlier of the date hereof and any earlier specified date with respect to such information.
As required by the NEX Exchange Rules, the Company will update the information provided in this document by means of a supplement to it if a significant new factor that may affect the evaluation by prospective investors occurs prior to Admission or if it is noted that this document contains any mistake or substantial inaccuracy. This document and any supplement thereto will be made public in accordance with the NEX Exchange Rules.
The contents of this document are not to be construed as legal, financial, business or tax advice. Each prospective investor should consult his or her own lawyer, financial adviser or tax adviser for legal, financial, business or tax advice in relation to any purchase or proposed purchase of Ordinary Shares. Each prospective investor should consult with such advisers as needed to make its investment decision and to determine whether it is legally permitted to hold shares under applicable legal investment or similar laws or regulations. Investors should be aware that they may be required to bear the financial risks of an investment in Ordinary Shares for an indefinite period of time.
This document is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Company, the Directors or Grant Thornton or any of their representatives that any recipient of this document should subscribe for or purchase any of the Ordinary Shares.
2 Prior to making any decision as to whether to subscribe for or purchase any Ordinary Shares, prospective investors should read the entirety of this document and, in particular, the section headed “Risk Factors” in Part 2 of this document.
Investors should ensure that they read the whole of this document and not just rely on key information or information summarised within it. In making an investment decision, prospective investors must rely upon their own examination (or the examination of the prospective investor’s lawyers, financial advisers or tax advisers) of the Company and the contents of this document, including the risks involved. Any decision to purchase Ordinary Shares should be based solely on this document and the prospective investor’s (or such prospective investor’s lawyers, financial advisers or tax advisers) own examination of the Company.
None of the Company, the Directors, Grant Thornton or any of their representatives is making any representation to any subscriber or purchaser of Ordinary Shares regarding the legality of an investment by such subscriber or purchaser.
Grant Thornton and any of their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services to the Company, for which they would have received customary fees. Grant Thornton and any of its respective affiliates may provide such services to the Company and any of its affiliates in the future.
Forwardlooking statements All statements, other than statements of historical facts, included in this document, including, without limitation, those regarding the Group’s financial position, business strategy, plans and objectives of management for future operations or statements relating to expectations in relation to dividends or any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “plans”, “will”, “may”, “anticipates”, “would”, “could” or similar expressions or the negative thereof, are forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the actual results, performance, achievements of or dividends paid by the Company to be materially different from actual results, performance or achievements, or dividend payments expressed or implied by such forward looking statements.
These forward looking statements speak only as of the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein to reflect any change in the Company’s expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.
Bases and sources Various market data and forecasts used in this document have been obtained from independent industry sources. The Company has not verified the data, statistics, or information obtained from these sources and cannot give any guarantee of the accuracy or completeness of the data. Forecasts and other forward looking information obtained from these sources are subject to the same qualifications, risks and uncertainties as above. Various figures and percentages in tables in this document have been rounded and accordingly may not total. Certain financial data has also been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly form the actual arithmetical totals of such data. All times referred to in this document are, unless otherwise stated, references to London time.
3 TABLE OF CONTENTS
Page SHARE CAPITAL AND ADMISSION STATISTICS...... 5
EXPECTED TIMETABLE OF PRINCIPAL EVENTS ...... 5
COMPANY OFFICERS, REGISTERED OFFICE AND ADVISERS ...... 6
DEFINITIONS...... 7
PART 1 INFORMATION ON THE COMPANY...... 10
PART 2 RISK FACTORS ...... 28
PART 3 UNAUDITED INTERIM FINANCIAL INFORMATION ON THE GROUP ...... 37
PART 4 ADDITIONAL INFORMATION...... 46
APPENDICES
AUDITED CONSOLIDATED FINANCIAL INFORMATION FOR THE GROUP FOR: THE YEAR ENDED 28 FEBRUARY 2018 ...... A 1
THE YEAR ENDED 28 FEBRUARY 2017 ...... A 42
THE 13 MONTHS ENDED 29 FEBRUARY 2016...... A 70
4 SHARE CAPITAL AND ADMISSION STATISTICS
Admission Number of Ordinary Shares as at the date of this document 136,467,088
Number of Ordinary Shares to be issued pursuant to the conversion of Growth Shares 5,734,809
Number of Ordinary Shares to be issued on Admission pursuant to the Woodford Commitment 10,500,000
Number of Ordinary Shares in issue immediately following Admission 152,701,897
Total Voting Rights immediately following Admission 150,357,744*
Share price on Admission £2.25
Estimated market capitalisation of the Company immediately following Admission £344 million
NEX Exchange Growth Market symbol (TIDM) PPI
ISIN GB00BJCWB146
SEDOL BJCWB14
LEI 213800WYHWH3JXPZ1K75
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of this document 25 February 2019
Admission becoming effective and commencement of dealings in the Ordinary Shares 28 February 2019
References to times and dates in the timetable above are to Greenwich Mean Time unless otherwise stated. Each of the times and dates in the above timetable is subject to change.
* The difference between the Issued Share Capital and Total Voting Rights is the result of the limit of 19.50 per cent. on voting rights held by WEIF as described in paragraph 15 of Part 1 of this document.
For the purposes of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (“DTRs”), this figure of 150,357,744 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company, under the DTRs. The Company will provide updates via a regulatory information service provider whenever the total number of voting rights changes.
5 COMPANY OFFICERS, REGISTERED OFFICE AND ADVISERS
Directors Rupert Lowe, Independent Nonexecutive Chairman Michael Moran, Chief Executive Officer Professor Edward Karol Sikora, Chief Medical Officer Paul Tuson, Chief Financial Officer Dr Michael von Bertele, Senior Independent Nonexecutive Director Alain Baron, Nonexecutive Director Professor Sir Christopher Evans, Nonexecutive Director
Company secretary Paul Tuson
Registered office 15 Bridge Street Hereford HR4 9DF
Head office of the Company Celtic Springs Spooner Close Newport NP10 8FZ
Website www.proton int.com
NEX Exchange Corporate Adviser Grant Thornton UK LLP 30 Finsbury Square London EC2A 1AG
Legal advisers to the Company Fieldfisher LLP as to English law Riverbank House 2 Swan Lane London EC4R 3TT
Legal advisers to the NEX Exchange Trowers & Hamlins LLP Corporate Adviser 3 Bunhill Row London EC1Y 8YZ
Auditors to the Company PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors One Kingsway Cardiff CF10 3PW
Reporting Accountant RSM Corporate Finance LLP 25 Farringdon Street London EC4A 4AB
Registrars Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR
6 DEFINITIONS
The following definitions apply throughout this document, unless the context requires otherwise:
Admission the admission of the entire issued share capital of the Company to trading on NEX, becoming effective in accordance with Rule 24 of the NEX Exchange Rules
Articles the articles of association of the Company to be adopted conditional on Admission
Board or Directors the directors of the Company as at the date of this document, whose names are set out on page 6 of this document
Companies Act or Act the Companies Act 2006 (as amended)
Company Proton Partners International Limited
Concert Party LF Woodford Equity Income Fund, Woodford Patient Capital Trust plc, Omnis Income & Growth Fund and Wales Life Sciences Investment Fund, which are deemed to be acting in concert for the purposes of the Takeover Code
CREST the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by Euroclear UK & Ireland Limited
CREST Regulations the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended)
CSOP The Proton Partners International Limited Company Share Option Scheme details of which are set out in paragraph 23 of Part 1 of this document and paragraph 12 of Part 4 of this document
DTR the disclosure guidance and transparency rules made by the FCA
EBITDA earnings before interest, tax, depreciation and amortisation
EC European Commission
EEA the European Economic Area
EU European Union
Euroclear Euroclear UK & Ireland Limited, the operator of CREST
Existing Ordinary Shares the 136,467,088 Ordinary Shares in issue as at the date of this document
FCA the Financial Conduct Authority of the United Kingdom
FSMA the Financial Services and Markets Act 2000 (as amended)
GDPR the General Data Protection Regulation (GDPR) (Regulation) (EU) 2016/679
Grant Thornton Grant Thornton UK LLP, NEX Exchange Corporate Adviser to the Company, authorised and regulated by the FCA
Group the Company and its subsidiary undertakings as defined in the Companies Act
Growth Shares the Shares of £0.001 each in the Capital of the Company, subject to the rights and restrictions in the articles of association of the Company prior to Admission
7 Historical Financial Information the unaudited consolidated financial information of the Group for the eleven months ended 31 January 2019, as set out in Part 3 of this document and the audited consolidated financial information of the Group for the three years and one month ended 28 February 2018 as appended to this document
HMRC Her Majesty’s Revenue and Customs
IBA Ion Beam Applications, SA, of 3 Chemin du Cyclotron, 1348 Louvain la Neuve, Belgium, the Group’s current supplier of PBT equipment
Introduction Agreement the conditional agreement entered into on or prior to Admission between the Company, Grant Thornton and the Directors in relation to the Admission, details of which are set out in paragraphs 10 and 11.1 of Part 4 of this document
IFRS International Financial Reporting Standards as adopted by the EU
Issued Share Capital the issued ordinary share capital of the Company immediately following Admission
ITEPA the Income Tax (Earnings and Pensions) Act 2003
Lockedin Persons the Woodford Funds and the Wales Life Sciences Investment Fund
London Stock Exchange London Stock Exchange plc
MAR the EU Market Abuse Regulation (2014/596/EU) and associated delegated acts, implementing acts, technical standards and guidelines
Member State a member state of the EEA
NEX NEX Exchange Growth Market
NEX Exchange NEX Exchange Limited, a Recognised Investment Exchange under section 290 of FSMA
NEX Exchange Growth Market the primary market segment operated by NEX Exchange for dealings in unlisted securities
NEX Exchange Rules NEX Exchange Growth Market – Rules for Issuers
NHS the National Health Service of the UK
OIG Omnis Income & Growth Fund, a sub fund of Omnis Portfolio Investments ICVC
Options options granted pursuant to the CSOP
Ordinary Shares ordinary shares of £0.001 each in the capital of the Company
PBT proton beam therapy
Philips Koninklijke Philips N.V.
Prospectus Directive Directive 2003/71/EC of the European Parliament and of the Council of the European Union (as amended, and including any relevant implementing measures in a Member State)
Prospectus Rules the prospectus rules made by the FCA under Part VI of the FSMA, as amended
QCA the Quoted Companies Alliance
8 QCA Code The QCA Corporate Governance Code published by the QCA in April 2018
Shareholder(s) person(s) who is/are registered as holder(s) of Ordinary Shares from time to time
Takeover Code the City Code on Takeovers and Mergers published by the Takeover Panel
Takeover Panel the UK Panel on Takeovers and Mergers uncertificated or in uncertificated form Ordinary Shares recorded on the register of members of the Company as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of an instruction issued in accordance with the rules of CREST
UK or United Kingdom United Kingdom of Great Britain and Northern Ireland
Wales Life Sciences Investment Fund Wales Life Sciences Investment Fund LP
USA or United States the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
WEIF LF Woodford Equity Income Fund
WHSSC Welsh Health Specialised Services Committee
Woodford Woodford Investment Management Limited
Woodford Commitment the undertaking by Woodford on behalf of WEIF and OIG to subscribe for Ordinary Shares under the terms of an agreement described in paragraph 11.6 of Part 4 of this document
Woodford Funds LF Woodford Equity Income Fund, Woodford Patient Capital Trust plc and Omnis Income & Growth Fund, all of which are managed by Woodford Investment Management Ltd
WPCT Woodford Patient Capital Trust PLC
£ and p United Kingdom pounds Sterling and pence, respectively
US$ United States Dollar
9 PART 1
INFORMATION ON THE COMPANY
1. INTRODUCTION Proton Partners International Limited is the holding company of a group committed to providing innovative cancer care of the highest quality. The Group’s oncology centres in the UK offer a comprehensive range of cancer treatments to patients including radiotherapy, chemotherapy, imaging and ancillary wellbeing services. The Group is the first to offer high energy proton beam therapy in the United Kingdom with the first patients to receive proton beam therapy having received treatment at the Group’s cancer centre in Newport, South Wales, in April 2018. In 2018, the Group completed the construction of centres in Bedlington, Northumberland and in Reading, Berkshire which are now open for treatment and are expected to offer proton beam therapy to patients from spring 2019 and late summer 2019 respectively. Construction of the building that will house the Group’s fourth centre in Liverpool is due to be completed in 2019, with operations commencing when further funds have been generated to fund fit out and commissioning. The services on offer are accessible to private patients under medical insurance, self pay patients and patients referred by the NHS, with proton beam therapy offered at a substantial discount to the cost faced by the NHS of sending patients overseas for treatment. The Group has agreements with a number of the major UK health insurance companies including WPA, AXA PPP, Vitality and BUPA, and confirmations from Allianz and Aviva that members of these insurance companies can utilise the Group’s services. The Group has service level agreements for pathology with a number of NHS Trusts in England and a letter of confirmation from WHSSC that the Group has been commissioned to provide adult proton beam therapy from the Group’s cancer centre in Newport. At present, the only other facility in the UK offering high energy proton beam therapy is a NHS facility in Manchester. It is the Group’s vision to deliver leading edge cancer treatment including proton beam therapy within 90 minutes’ drive of 75 per cent. of the UK population. The Group works with internationally renowned healthcare technology partners, including Philips, Elekta and IBA, to ensure that its centres are equipped to the highest specification. The Group also has a network of research and academic partners who will work together to contribute to the wider research effort in cancer care.
2. HISTORY AND BACKGROUND The Group was established in February 2015 with the establishment of Proton Partners International Limited by the Company’s Chief Executive Officer, Mike Moran and its Chief Medical Officer, Professor Karol Sikora, in order to challenge conventional thinking on how best to provide leading edge cancer treatment to patients in the UK including proton beam therapy which was previously only available outside the UK. The Company was formed on World Cancer Day, 4 February 2015 followed by an equity raise of £70 million at £1 per Ordinary Share from institutional investors including Wales Life Sciences Investment Fund and funds managed by Woodford Investment Management Limited and investment from technology suppliers including IBA and Philips, high net worth individuals and Western Provident Assurance. In December 2015, a debt facility of £30 million was provided by Shawbrook Bank Limited. In July 2015 the Group acquired its first site in Celtic Springs Business Park in Newport, South Wales. In October 2016, the Group completed a £55 million equity fundraising at £1.15 per Ordinary Share and secured a further £5 million debt facility. In November 2016, the Group acquired approximately 10 per cent. of the Gulf International Cancer Centre, Abu Dhabi which had received an exclusive licence for proton beam therapy across the seven Emirates in the UAE. With the benefit of equity and debt raised, the Group completed construction and fit out of its first centre in Newport, South Wales, in 2017 and its second and third centres in Northumberland and Reading in 2018, each at a cost of between £35 million and £42 million. The first patients were treated in South Wales in April 2018 and Northumberland and the Thames Valley later in 2018.
10 3. PROTON BEAM THERAPY The two main types of treatment used in the fight against cancer are (i) systemic, namely chemotherapy and immunotherapy which seek to destroy cancerous cells in the body; and (ii) localised, namely surgery and radiotherapy, which seek to destroy a tumour located in a specific part of the body. Today, more than half of patients suffering from cancer receive doses of radiation as part of their treatment.
Around four in ten of all NHS cancer patients are treated with conventional radiotherapy, which typically uses high energy x rays from a machine called a linear accelerator (LINAC). By contrast, proton beam therapy is a type of radiotherapy that uses a beam of high energy protons, which are small parts of atoms, rather than high energy x rays (called “photons”) to treat specific types of cancer. A proton is a charged particle that is approximately 2,000 times heavier than a photon and which travels at two thirds the speed of light, or approximately 230,000 miles per second.
Proton beam therapy was first recognised as a treatment for cancer in 1948. The breakthrough with proton therapy came with the advent of 3D imaging when a proton could be directed at a defined spot (the tumour) in human tissue with vastly reduced collateral damage. Today, proton beam therapy is considered to be the most advanced form of radiotherapy in the fight against cancer.
The major advantage of proton treatment over conventional radiation is that the energy distribution of protons can be targeted more precisely and, therefore, reduce collateral damage to non cancerous cells. The unique dose deposition that proton therapy offers enables the tumour to be targeted more effectively than is the case with other treatments. Compared to photon radiotherapy, protons deposit almost all their energy within a controlled zone and, in the vast majority of cases, limit the amount of the dose deposited in the healthy tissue and vital organs surrounding the tumour which is a particular advantage in certain groups of patients or where the cancer is close to a critical part of the body such as the spinal cord. The use of protons consequently offers the potential to reduce the secondary effects of the treatment.
As a result, proton beam therapy has a number of significant advantages compared with conventional radiotherapy, including:
• a more effective treatment due to the markedly increased proportion of the dose deposited inside the tumor and the radio biological effect of protons, which is superior to that of photons;
•areduction of side effects, particularly in children, owing to a far lower dose deposited in healthy tissue, which can contribute to preserving the quality of life of a patient both during and after treatment;
•areduced risk of secondary cancers and other long term complications because proton therapy significantly reduces the dose deposited in healthy tissue when compared with conventional radiotherapy; and
•apreferred solution for retreatments as proton beam therapy can be used on parts of the body that have previously undergone conventional radiotherapy.
Proton beam therapy is currently being used to treat numerous types of cancer. It is proving to be a particularly appropriate treatment when options are limited and standard radiotherapy presents unacceptable risks for the patient. This applies in particular to ocular and brain cancers, cancers of the head and neck, complex prostate cancer, cancer of the liver, lung and left breast, paediatric cancers and tumours located close to one or more vital organs.
An increasing number of studies show that in addition to its benefits and physical properties, proton beam therapy is also a more cost effective, long term treatment for certain clinical indications when patients are selected in an appropriate manner.
The Directors believe that less than 1 per cent. of those receiving radiotherapy currently have access to proton beam therapy in the UK.
Proton beam therapy as a cancer treatment achieves substantially improved outcomes in many incidents of cancer currently being treated with radiotherapy. However, traditionally the incremental cost of proton beam therapy relative to conventional radiotherapy has resulted in its application to only those cases where the collateral damage risks are highest, for example; neural, ocular and paediatric.
11 Although technical advances have made proton beam therapy more affordable, the cost of building facilities is substantial; the NHS facility in Manchester reportedly cost approximately £125 million compared with a cost of between £35 million to £42 million to build and fit out the Group’s centres. Construction of proton beam therapy centres is challenging because of the complexities of the structure and the shielding required. Having developed three Rutherford Cancer Centres with a fourth under construction, the Group has developed an expertise in the construction of proton beam therapy centres. The Group has established a specific company, Rutherford Estates Limited within the Group that specialises in the development and non clinical operation of proton beam therapy capable centres. The Group plans to use this expertise to offer design, project management and commissioning services to third parties internationally; negotiations with the business unit’s first potential customer are underway.
The Group is now recognised as one of the world’s largest developer of proton beam therapy centres using IBA equipment. Of the 65 centres operating worldwide, IBA is the market leader with over 50 systems operational.
4. THE MARKET FOR PROTON BEAM THERAPY An increasing number of clinical trials and studies are on going to evaluate the clinical benefit of proton beam therapy compared to standard radiotherapy. The Dutch “Horizon scanning report” shows that at least 17.7 per cent. of patients treated with radiotherapy could benefit from proton beam therapy, whereas less than 1 per cent. are currently doing so in the UK.
When this proportion of 17.7 per cent. is extrapolated to the world population, it can be seen that there would be a need for more than 2,500 proton therapy rooms worldwide, whereas only 265 proton therapy rooms have currently been commissioned.
In 2017, the American Society for Radiation Oncology (ASTRO) and the National Comprehensive Cancer Network (NCCN) expanded its indication policies for proton therapy, leading to greater penetration of the market for proton therapy in the USA. The guidelines further endorse proton therapy as a treatment option in certain clinical conditions.
There are estimated to be 65 high energy proton beam therapy centres operational worldwide comprising 265 treatment rooms. Of the 65 proton beam therapy centres worldwide, four are located in the UK, three of which are owned and operated by the Group and one is owned and operated by the NHS (Christies NHS Centre in Manchester).
Of the high energy proton beam therapy centres believed to be under construction worldwide, only two are presently being developed in the UK, being the Group’s centre in Liverpool and the UCLH NHS Centre in London which is expected to be operational in 2020.
High energy proton beam therapy has been considered mainstream medical treatment in the UK since 2015. In 2016 the NHS announced that it would fund 1,500 patients for proton beam therapy abroad and in 2017 sent 210 patients abroad, mostly to the US and Switzerland at an average cost of approximately £114,000 per patient per course of treatment.
It is anticipated that NHS demand for proton beam therapy will continue to increase year on year. Based on the current numbers of patients receiving radical radiotherapy treatment annually, estimated at 90,000 each year and based on the Group’s lower estimated level of 10 per cent. of those patients being more appropriately treated with proton beam therapy, there is an estimated addressable market in the region of 9,000 patients per year.
The capacity of each of the Group’s centres is estimated to be 400 proton beam therapy patients per year. Accordingly, the Directors believe that there is significant demand for multiple proton beam therapy facilities to be developed in the UK within the private sector and provides a significant opportunity for the Group to develop further proton beam therapy facilities. As an illustration of how poorly served the UK is with proton beam therapy, at present the UK has just two centres offering proton beam therapy whereas, the Directors believe that there are 36 centres offering proton beam therapy in the USA.
The Directors believe, demand for proton beam treatment is likely to increase in the USA as a result of a recent court case where substantial damages were awarded to the family of a patient who died of cancer after being denied proton beam therapy. In the UK, the increased demand and increasing acceptance by the NHS of the use of proton beam therapy along with other factors, has led to the UK Government to commit £250 million towards developing proton beam therapy facilities in the UK. In addition to the proton beam
12 therapy centre at Christie NHS Foundation Trust in Manchester where services have already commenced, the NHS is developing a centre at University College London Hospital (UCLH) NHS Foundation Trust where services are expected to commence in 2021.
Nonetheless, even with the new PBT facilities coming into service, the Directors believe that the NHS will need to outsource proton beam therapy. The Directors believe that the NHS will prefer to refer patients to a UK provider such as the Group rather than overseas because of the greater convenience to patients and their families, the saving of transport and accommodation costs, the higher overall cost of treatment overseas and the confidence they have in the UK’s regulatory framework.
5. THE GROUP’S CANCER CENTRES The Group’s cancer centres have been named after the renowned scientist Ernest Rutherford who is best known for his contribution to identifying and naming the proton in 1911. Currently, the Group has three centres that are operational, and a fourth under construction. Each is designed to treat up to 400 proton beam therapy patients per year on a single eight hour shift working weekdays only. The Directors believe that each centre can treat up to 750 proton beam therapy patients a year working double shifts.
Although the Group’s cancer centres are differentiated from all other private cancer treatment centres currently operating in the UK by offering proton beam therapy, they have been designed to offer a comprehensive range of cancer treatments and diagnostic services including: • Proton beam therapy • Radiotherapy • Chemotherapy • Immunotherapy • Biological therapy • Hormone therapy • CT (computerised tomography) scanner • MRI (magnetic resonance imaging) scanner
Each completedcancer centre is fitted with state of the art equipment including proton beam equipment supplied by IBA, the world’s leading supplier of proton beam machinery, conventional radiotherapy equipment by Elekta and imaging equipment by Philips. Each centre cost on average between £35 million and £42 million to build and fit out.
Every patient that comes to one of the Group’s cancer centres is offered a personalised care pathway including access to support teams for advice or assistance. A holistic needs assessment is available for patients to complete, which allows the centres’ teams to better identify and accommodate any concerns the patient may have and to prepare a care plan that addresses the patient’s personal support and care needs. The centres are designed to provide the most pleasant conditions possible for what is a difficult and distressing time for patients and their families.
• Rutherford Cancer Centre South Wales The Rutherford Cancer Centre South Wales, based at Newport, was the Group’s first cancer centre in a refurbished building with new build elements, situated in a business park and opened in 2017. The centre provides a range of oncology services covering both planning and treatment, with proton therapy and radiotherapy for adults and children. Systemic Anti Cancer Therapies (SACT) is available for adults only and available supportive therapies are uniquely tailored to each of the centre’s patients’ clinical needs.
• Rutherford Cancer Centre North East The Rutherford Cancer Centre North East was the first of the Group’s custom built centres on a greenfield site in Northumberland, designed from the outset to suit the needs of its patients and offering the latest in diagnostic technology and treatments including radiotherapy and chemotherapy, in addition to wellbeing services. Proton beam therapy is due to be available at the Rutherford Cancer Centre North East from spring 2019.
13 • Rutherford Cancer Centre Thames Valley The Rutherford Cancer Centre Thames Valley opened in Reading in 2018 in the newly built Thames Valley Science Park in a bespoke building designed from the outset as a dedicated cancer centre. From late summer 2019, Rutherford Cancer Centre Thames Valley will have proton beam therapy available and is currently open for patients requiring radiotherapy, diagnostic imaging, chemotherapy and supportive cancer care.
• Rutherford Cancer Centre North West The Rutherford Cancer Centre North West is currently being constructed as part of the city of Liverpool’s Knowledge Quarter development, situated close to both the university and hospital. Construction of the building is scheduled to be complete later in 2019. The Group will install and commission equipment once it has raised the necessary additional funds after Admission. When open, the centre will provide specialist treatment and imaging facilities, offering patients radiotherapy, chemotherapy and proton beam therapy alongside tailored supportive care services, all designed to provide patients with a holistic approach to care during and after the delivery of their personalised treatment plans.
• Gulf International Cancer Center, Abu Dhabi The Group acquired an interest of approximately 10 per cent. of the Gulf International Cancer Centre, Abu Dhabi in November 2016. The centre’s services include cancer diagnosis with PET CT (positron emission tomography – computed tomography), Hematology Oncology and Radiation Oncology offering the latest techniques and equipment within this evolving medical specialty.
6. DIAGNOSTICS Rutherford Diagnostics, a subsidiary of the Company, has been established to provide state of the art cancer diagnostics using the most advanced techniques including genomic sequencing, personalised screening and innovative diagnostic technologies. Apart from becoming a profit centre in its own right, the Directors hope that Rutherford diagnostics will encourage patients to seek treatment at the Group’s cancer treatment centres.
Through its work, the Company hopes that Rutherford Diagnostics will support the best possible healthcare outcomes through prediction, prevention and earliest possible detection of disease. By gathering data through the diagnostics process and at the treatment centres, the Group intends to build a substantial database that is capable of generating intellectual property that could itself give rise to new treatments and services.
The Group is currently considering its options as to how best to develop this division.
7. COMPETITIVE ENVIRONMENT At present, the Directors believe that there is a substantial underserved market for proton beam therapy with over 9,000 cancer patients in the UK suitable for proton beam therapy but capacity for less than 1,000 at the two centres currently offering proton beam therapy in the UK, being the Group’s South Wales centre and the NHS centre in Manchester. In addition, the Group is expecting to be offering proton beam therapy at two additional centres in the UK in 2019 with a third in 2021 depending on the availability of further funds. The Group is aware of two other centres under development, being a NHS proton beam therapy facility in London and the development and manufacture by a third party of a proprietary proton beam system to be installed at Harley Street in London. In addition, there is a low energy proton beam energy facility for treating rare eye tumours at the NHS Clatterbridge Cancer Centre. The Group is not aware of any other organisation from the UK or elsewhere planning to establish proton beam therapy centres in the UK.
The Directors believe that there exists capacity in the UK alone for several more proton beam therapy centres and that the Group’s existing and planned centres will be fully utilised in the short term. With unsatisfied demand from continental Europe and the rest of the world, the demand for the Group’s proton beam therapy services is likely to be even greater.
There are a number of private organisations in the UK including specialist cancer clinics which offer radiotherapy, chemotherapy, diagnostics and wellness services and private hospitals which offer the same diagnostics and treatments that the Rutherford Cancer Centres offer along with surgery, which the Group has no plans to introduce.
14 The Directors believe that the Group will be competing with other private clinics and hospitals for patients seeking conventional radiotherapy, chemotherapy and immunotherapy but consider that at present it is facing no significant competition for proton beam therapy. Because the market for proton beam therapy is so underserved in the UK, the Board sees the NHS as a referrer of patients to the Group’s Rutherford Cancer Centres which they believe it will do in preference to paying larger fees for patients to receive treatment overseas.
8. KEY STRENGTHS OF THE GROUP The Directors believe that the Group is positioned to become the leading provider of proton beam therapy in the UK and is well positioned for continued growth in an environment shaped by the increasing incidence of cancer. The Directors believe that the Group’s strategy, together with the following competitive advantages, distinguish it in its marketplace.
First mover advantage in a large, growing and underserved market The Group believes that the market for its services will grow steadily for the foreseeable future due to (i) an ageing population; (ii) increasing knowledge of and demand from patients and clinicians for proton beam therapy; and (iii) increasing preference on the part of patients, clinicians and funders to arrange proton beam therapy treatment in the UK rather than funding treatment overseas. The Directors believe that the Group will benefit from being the first independent organisation to offer proton beam therapy in the UK and having created significant barriers to entry.
Comprehensive range of treatments Other than surgery, the Group offers what the Directors believe is the most comprehensive cancer treatment programme available outside the NHS including proton beam therapy for which there is currently only limited availability in the UK. The Group therefore can offer referrers a complete “one stop shop” for cancer treatment.
Service agreements with major health insurance providers and the NHS The Group has agreements with a number of the major UK health insurance companies including WPA, AXA PPP, Vitality and BUPA, and confirmations from Allianz and Aviva that members of these insurance companies can utilise the Group’s services. The Group has service level agreements for pathology with a number of NHS Trusts in England and a letter of confirmation from WHSSC that the Group has been commissioned to provide adult proton beam therapy from the Group’s cancer centre in Newport. Therefore, the Directors believe, the Group is well positioned to attract and respond to patient referrals.
Proven, experienced market leading management team The Group benefits from a senior management team and advisers with many years’ high level experience in healthcare. Further details of the Board are set out in paragraph 13 of this Part 1.
Expertise in developing treatment centres Having developed three cancer treatment centres with a fourth under construction, the Group has developed an expertise in building high quality facilities on time and within budget. As one of the most experienced developers of proton beam therapy facilities using IBA equipment, the most widely used proton beam therapy technology worldwide, the Directors believe that the Group is well placed to develop further Rutherford Cancer Centres.
Advanced diagnostics services Through Rutherford Diagnostics, the Group has designed what is intended to be both a profit centre and a means of identifying, using the most advanced techniques available, the best treatment protocol for patients of the Rutherford treatment centres, providing a referral service to the Group’s centres and elsewhere, where appropriate.
The benefits of scale The Group intends to have a network of diagnostic and treatment centres strategically placed across the UK with the intention to ensure that the majority of the UK population is within a 90 minute drive of a Rutherford Cancer Centre. The network will enable the Group to reduce operating costs by centralising overheads,
15 allow the different Rutherford Cancer Centres to share information and expertise and, when developed, use diagnostics centres as a source of referral to the Group’s treatment centres.
9. GROWTH STRATEGY Following completion of the Group’s centre in Liverpool, the Group intends to build a small number of additional centres to ensure than proton beam therapy is available within a 90 minute drive of 75 per cent. of the UK population. Using a unique combination of skills it has developed while building its first four cancer treatment centres, the Directors believe the Group is better positioned to roll out a programme of building a geographically widespread network of proton beam therapy cancer centres within the UK than any other organisation.
The Group plans to use its expertise to develop and operate cancer treatment centres overseas. The Group is in advanced negotiations with a developer in Ireland for a proton beam therapy centre in Kildare on a site which has already received planning permission. The Group is also in negotiations with a developer in Canada for a PBT centre in Montreal. In both cases, the opportunity would require some investment from the Group for which it would receive a contract to project manage the construction of the centre and a management contract to operate it. In Italy, Rutherford Estates is in advanced negotiations with a global hospital operator for the development of a PBT centre in Milan.
The Directors also intend to expand the Group’s diagnostics capabilities through establishing new centres and by introducing the latest techniques as they become available.
The Directors intend that the diagnostics centres will become both profit centres in their own right and a referrer of patients to the Group’s cancer centres.
10. WOODFORD COMMITMENT The Company has entered into a commitment agreement with Woodford Investment Management Limited (“Woodford”), acting as agent for and on behalf of LF Woodford Equity Income Fund (“WEIF”) and Omnis Income and Growth Fund (“OIG”) under which Woodford has undertaken to subscribe on behalf of WEIF and OIG for (i) 10,000,000 new Ordinary Shares at a price of £2 per Ordinary Share effective upon Admission and (ii) upon the request of the Company at any time after Admission, for Ordinary Shares up to a value of £80 million at the volume weighted average price on the NEX Exchange Growth Market of Ordinary Shares for the 30 trading days prior to the date on which the request by the Company is made less 12 per cent., subject to a maximum price of £1.76 and a minimum price of £1.00 per Ordinary Share. In consideration for entering into these arrangements, Woodford will receive a fee of £1,000,000, payable in Ordinary Shares at a price of £2 per Ordinary Share on Admission. The obligation to subscribe for Ordinary Shares terminates 18 months following Admission. Further information about the Woodford Commitment is set out In paragraph 11.6 of Part 4 of this document.
11. REASONS FOR ADMISSION The Directors believe that Admission will enable the Company to, inter alia:
• access investors and raise funds for the development of the Group following Admission;
• provide the flexibility to raise capital for future corporate acquisitions and to use its quoted securities as consideration for such acquisitions;
• provide the ability to incentivise key employees through the issue of share options; and
• raise the profile of the Group among investors and give confidence to patients, suppliers and regulatory authorities.
12. FINANCIAL INFORMATION AND CURRENT TRADING AND PROSPECTS Audited historical financial information for the Group for the three years and one month ended 28 February 2018 is appended to this document. Unaudited interim financial information for the 11 months ended 31 January 2019 is set out in Part 3 of this document. The following financial information has been derived from the financial information contained in Part 3 and the appendices to this document and should be read in conjunction with the full text of this document. Investors should not rely solely on the information summarised below.
16 Summary statement of comprehensive income Unaudited Audited 11 months Audited Audited 13 months ended year ended year ended ended 31 January 28 February 28 February 29 February 2019 2018 2017* 2016 £’000 £’000 £’000 £’000 Revenues 1,111 18 —— Cost of sales (2,333) ——— Gross Margin (1,222) 18 —— Administrative expenses (15,739) (10,572) (5,879) (3,048) Operating loss (16,961) (10,554) (5,879) (3,048) Finance income — 77 82 88 Finance expense (1,624) (1,034) (20)— Loss before income tax (18,585) (11,511) (5,817) (2,960) Income tax credit/(charge) 43 2,832 (11) — Loss after income tax (18,542) (8,679) (5,828) (2,960) Other comprehensive loss Loss on investment (4,163) ——— Total comprehensive loss (22,705) (8,679) (5,828) (2,960) Loss and total comprehensive loss attributable to: Equity holders of the Company (22,705) (8,679) (5,828) (2,960)
* As restated. The loss before income tax was originally stated as £5,820,000.
17 Summary statement of financial positions Audited Audited Unaudited Audited position position position position (as restated) (as restated) as at as at as at as at 31 January 28 February 28 February 29 February 2019 2018 2017 2016 £’000 £’000 £’000 £’000 ASSETS Noncurrent assets Property, plant and equipment 135,005 98,081 58,401 25,281 Intangible assets 560 ——— Investments — 4,163 4,163 — Deferred tax asset 2,801 2,801 —— Noncurrent assets 138,366 105,045 62,564 25,281 Current assets Trade and other receivables 5,205 7,210 2,687 2,804 Current tax receivable — 31 —— Cash and cash equivalents 1,396 6,695 35,141 27,305 Current assets 6,601 13,936 37,828 30,109 Total Assets 144,967 118,981 100,392 55,390 Equity attributable to the Company’s equity holders Share capital 136 121 107 71 Share premium account 137,520 111,309 97,548 57,509 Other comprehensive loss (4,163) ——— Retained earnings (35,890) (17,416) (8,789) (2,961) Total equity 97,603 94,014 88,866 54,619 LIABILITIES Noncurrent liabilities Borrowings 24,372 13,149 8,773 46 Current liabilities Trade and other payables 22,992 11,818 2,742 725 Current income tax liabilities ——11 — Current liabilities 22,992 11,818 2,753 725 Total liabilities 47,364 24,967 11,526 725 Net equity and liabilities 144,967 118,981 100,392 55,390
18 Summary statement of cash flows Unaudited Audited Audited for the Audited (as restated) for the 11 months for the for the 13 months ended year ended year ended ended 31 January 28 February 28 February 29 February 2019 2018 2017 2016 £’000 £’000 £’000 £’000 Cash flows from operating activities Net cash generated from operations 70 (4,946) (3,404) (5,046) Income taxes paid — (11) —— Net cash used in operating activities 70 (4,957) (3,404) (5,046) Cash flows from investing activities Purchase of property, plant and equipment (39,701) (45,928) (33,152) (25,317) Purchase of intangibles (39) — (4,163) — Disposal of property, plant and equipment — 5,245 —— Interest received — 77 82 88 Net cash used in investing activities (39,740) (40,606) (37,233) (25,229) Cash flows from financing activities Proceeds from issue of shares 25,545 13,775 40,075 57,580 Net proceeds from issue of new loans 10,519 4,310 8,424 — Lease payments (75) 66 (6) — Interest paid (1,618) (1,034) (20)— Net cash generated from financial activities 34,371 17,117 48,473 57,580 Net increase in cash and cash equivalents (5,299) (28,446) 7,836 27,305 Cash and cash equivalents at the start of the period 6,695 35,141 27,305 — Cash and cash equivalents at the end of the period 1,396 6,695 35,141 27,305
The historical financial information principally covers a period when the Group’s centres were under construction and only recently has the Group started to generate income. This is reflected in the limited revenues to date and the costs incurred in developing the centres, hiring qualified and experienced staff and establishing the processes and regulatory and other compliance necessary to begin operations.
Patient numbers are increasing month on month with the first patient receiving proton beam therapy having completed his course of treatment at the Group’s South Wales centre in April 2018. Proton beam therapy is planned to be available at the Group’s North East and Thames Valley centres later in 2019. The Directors anticipate patient numbers continuing to increase on a monthly basis for the foreseeable future.
13. DIRECTORS The Board consists of three executive Directors and four non executive Directors, details of whom are set out below:
Directors Rupert James Graham Lowe, aged 61, Independent NonExecutive Chairman Rupert Lowe is a former chairman of Southampton Leisure Holdings plc and WH Ireland Group plc, a stockbroking and financial advisory business. He was a member of the Committee that created the FTSE 100 Index whilst at Phillips and Drew, worked for Deutsche Bank, in the Treasury Department of Morgan Grenfell and was a board member of the London International Financial Futures Exchange. He became chairman of Secure Retirement plc, a quoted sheltered housing provider, which acquired Southampton Football Club in the mid 1990s, by way of a reverse takeover, when the enlarged group was renamed
19 Southampton Leisure Holdings plc, following which Rupert became Chairman of Southampton Football Club. He presided over the £34 million development of St Mary’s Stadium and formed the Club’s Youth Academy which has produced several international players, and continues to create much needed revenue for the Club. The Club reached the FA Cup final in 2003 and qualified for the UEFA Cup for the first time in nearly 20 years. He was chairman/director of Jubilee Group Holdings (Lloyds insurance) from 2002 until it was sold in 2011. His Charitable work included past Chairmanship of the Prince’s Trust South East and support for the Duke of Edinburgh awards.
Michael Moran MBE, aged 58, Chief Executive Officer Mike Moran is a founder of the Company and has thirty years of experience in strategic leadership, planning and programme delivery with a proven track record in developing early start up businesses with the potential for rapid growth. Mike joined the British Army in 1982, serving in the Falkland Islands, South Georgia, Bosnia, Kosovo, the Middle East and Germany. Since retiring from the Armed Forces in 2001, Mike has been involved in a number of successful businesses, primarily in the defence and healthcare sectors, operating in national and international markets.
Mike has served as Chairman of Herefordshire and Worcestershire Learning and Skills Council where he oversaw £60 million of capital projects within the two Counties. He has also served as Chairman of Herefordshire & Worcestershire Chamber of Commerce, Chairman of Herefordshire & Worcestershire Chamber of Commerce Investment Syndicate and as a fundraiser for The Royal National College for the Blind in Hereford. Mike has a philanthropic bent, the focus of which is to support the development of young people through sport. Over the years, he has supported army skiing, numerous football teams, the British Biathlon Union and the International Taekwon do Federation of England (“ITF England”). Mike helped ITF England successfully bid to host the European Taekwon Do Championships in Liverpool in April 2017.
In 2010 Mike received the MBE in The Queen’s Birthday Honours list, for Services to Business.
Paul Adam Edward Tuson, aged 52, Chief Financial Officer Paul Tuson has served as Chief Financial Officer of the Company since March 2017 having served as its Finance Director until that date. With over 25 years’ experience of finance roles, Paul has been group finance director or chief financial officer with four AIM quoted UK registered companies. He has led a number of successful flotations, secondary fundraisings and successful venture capital exits.
Paul served as Chief Financial Officer of Lombard Risk Management Plc from February 2011 to February 2014 and served as its Company Secretary until February 2014 having served as an Interim Chief Financial Officer of Lombard Risk plc since September 2010. He served as Group Finance Director of AIM quoted Media Corporation plc (formerly Gaming Corp. PLC) from April 2006 to June 2007. Paul served as Chief Finance Officer of Active Risk Group Plc (also known as Strategic Thought Group Plc) and Strategic Thought Ltd. until December 2005. Paul currently serves as a non executive director of Harwood Wealth Management Group plc, an AIM quoted financial services company.
Paul qualified as a Chartered Accountant with KPMG, becoming a member of the Institute of Chartered Accountants in England and Wales in 1992.
Professor Edward Karol Sikora MH, MBBChir, PhD, FRCR, FRCP, FFPM, aged 70, Chief Medical Director Professor Karol Sikora is a founder of the Company and has more than forty years of experience as an oncologist treating patients worldwide. He is the former Chief of the World Health Organisation’s Cancer Programme and is the founding team member and Clinical Director of Cancer Partners UK.
Professor Sikora studied medical science and biochemistry at the University of Cambridge, where he obtained a double first. After clinical training he became a house physician at the Middlesex Hospital and registrar in oncology at St Bartholomew’s Hospital. He later became a research student at the MRC Laboratory for Molecular Biology in Cambridge working with Nobel Prize winner, Dr Sydney Brenner. He obtained his PhD and became a clinical fellow at Stanford University, California before returning to direct the Ludwig Institute in Cambridge. He served as Clinical Director for Cancer Services at Hammersmith for 12 years and established a major cancer research laboratory there, funded by the Imperial Cancer Research Fund. He chaired Help Hammer Cancer, an appeal that raised £8 million towards the construction of the new Cancer Centre at Hammersmith. He became Deputy Director (Clinical Research) of the Imperial Cancer Research Fund. From 1997 to 1999 he was Chief of the World Health Organisation Cancer Program and from 1999 to 2002, Vice President, Global Clinical Research (Oncology) at Pharmacia Corporation.
20 He has published over 300 papers and written or edited 20 books, is on the editorial board of several journals and is the founding editor of Gene Therapy and Cancer Strategy. He was a member of the UK Health Department’s Expert Advisory Group on Cancer (the Calman Hine Committee), the Committee on Safety of Medicines and remains an adviser to the WHO. He currently directs a cancer drug donation program in Africa and serves as Dean of Medicine at the University of Buckingham.
Michael James von Bertele CB OBE, FRCP, aged 62, Senior Independent NonExecutive Director Mike served as a doctor in the Army for 35 years, retiring in 2012 as the Director General of the Army Medical Services. He has extensive experience of planning and delivering comprehensive healthcare and humanitarian support in many different environments around the world, including most recently, delivery of the UK’s first Ebola treatment centre in Sierra Leone in 2015, and trauma hospitals in Iraq during the liberation of Mosul. He is currently a Non executive Director of Salisbury NHS Foundation Trust NHS, Chair of their Workforce Committee and a member of their Clinical Governance and Audit Committees. He is the Senior Independent Director at Proton Partners International and is the Chair of the Clinical Governance and Remuneration Committees, and a member of the Audit Committee.
Professor Sir Christopher Thomas Evans OBE DSc, PhD, aged 61, NonExecutive Director Professor Sir Chris Evans has a substantial track record of establishing high quality science companies, a large number of which have been taken public. Sir Chris is the Founder and Chairman of Excalibur Group, and founder of Arthurian Life Sciences. He founded, inter alia, Chiroscience Group plc, Celsis International Limited, BioVex Limited, Merlin Biosciences Limited, Vectura Group plc, Piramed Limited and Arix Bioscience plc.
He has built over 50 medical companies from scratch, many from his own ideas and inventions and floated 20 new medical businesses on stock markets in six different countries. He has created companies worth over $7 billion employing over 4,000 scientists, built hundreds of complex medical laboratories and facilities around the world and positively impacted many millions of lives with his work. He has also raised over $2 billion for cancer research projects.
He is widely regarded as one of Europe’s leading biotechnology entrepreneurs and was appointed an OBE in 1995 and Knighted in the New Year’s Honours List in 2001 for services to bioscience and enterprise.
Alain JeanPaul Baron, aged 38, NonExecutive Director Alain Baron has 15 years’ experience in managing investments, raising funds and supporting investment projects mainly in the Middle East and North African regions (“MENA”). He joined the Board in September 2017.
Between September 2004 and March 2012, Alain worked for the National Bank of Kuwait as a Private Banking Manager. While there, he managed investments for ultra high net worth individuals (“UHNWIs”), Private Family offices and leading business figures growing a sizable portfolio in traditional and non traditional investments and raised funds to support Kuwaiti entrepreneurs’ investment projects. In April 2012, Alain joined the Mirabaud banking group as Managing Director and head of MENA. While there, he established and developed the bank’s expansion strategy in the MENA region, developing and managing a team of wealth managers and setting long term objectives in accordance with the bank’s entrepreneurial management philosophy. Alain has provided investment advice to a private placement club of UHNWI seeking opportunities within a wide range of industries, principally Healthcare, Real Estate, Hospitality, Aviation and Disruptive Technology, through Venture Capital structures and Start up businesses. In February 2019, Alain became a member of the board of directors of Mirabaud Abu Dhabi Limited.
14. LOCKIN AND ORDERLY MARKET ARRANGEMENTS Pursuant to the lock in and orderly market provisions contained in the Introduction Agreement, each of the Directors has agreed to not dispose of any of his Ordinary Shares, save in certain circumstances, for a period of 12 months following Admission. In addition, for a period of 12 months after the first anniversary of Admission, they shall each notify the Company and Grant Thornton (for so long as it is the Company’s NEX Exchange Corporate Adviser) of any intention to deal or otherwise dispose of any Ordinary Shares. In addition, each of the Locked in Persons has agreed not to dispose of any of their Ordinary Shares, save in certain limited circumstances, for a period of six months after Admission. Further details of the lock in and orderly market arrangements are set out in paragraphs 11.1 and 11.5 of Part 4 of this document.
21 15. RELATIONSHIP AGREEMENT AND WOODFORD VOTING RESTRICTIONS Woodford Funds has entered into a Relationship Agreement with the Company, the principal purpose of which is to ensure that the Company will at all times be capable of carrying on its business independently of it and its associates. The Relationship Agreement will remain in force for so long as Woodford Funds and their associates retain an interest in 20 per cent. or more of the rights to vote at a general meeting of the Company attaching to Ordinary Shares. The Relationship Agreement will terminate if the Ordinary Shares cease to be admitted to trading on NEX (not including any period of suspension of trading). Further details on the Relationship Agreement are set out in paragraph 11.4 of Part 4 of this document.
In accordance with the Articles, the votes attaching to the Ordinary Shares held by either of LF Woodford Equity Income Fund (“WEIF”) and Omnis Income and Growth Fund (“OIG”) are each limited to 19.50 per cent. of the Company’s total voting rights. While the holding by OIG of Ordinary Shares is substantially below that level, WEIF will hold more than 19.50 per cent. of the Company’s Issued Share Capital. Details of WEIF’s holdings are set out in paragraph 22 of this Part 1. Shareholders should therefore be aware that their proportionate share of the Company’s total voting rights will be increased for so long as either the WEIF’s or OIG’s holding of Ordinary Shares represents more than 19.50 per cent. of the Company’s issued share capital.
16. CORPORATE AND CLINICAL GOVERNANCE The Directors acknowledge the importance of high standards of corporate governance and intend, given the Group’s size and the constitution of the Board, to comply with the principles set out in the QCA Corporate Governance Code. The QCA Code sets out a standard of minimum best practice for small and mid size quoted companies.
Upon Admission, the Board will comprise seven directors, three of whom shall be executive directors and four of whom shall be non executive directors, reflecting a blend of different experiences and backgrounds as described in paragraph 13 of this Part 1. The Board believes that the composition of the Board brings a desirable range of skills and experience in light of the Group’s challenges and opportunities following Admission, while at the same time ensuring that no individual (or a small group of individuals) can dominate the Board’s decision making. Two of the non executive Directors do not meet the strict criteria for independence set out in the UK Corporate Governance Code due to their connection with significant Shareholders in the Company. The Company intends to appoint a further non executive director following Admission.
The Board intends to meet regularly to review, formulate and approve the Group’s strategy, budgets, corporate actions and oversee the Group’s progress towards its goals. The Group has established an Audit Committee, a Remuneration Committee and a Clinical Governance Committee, each with formally delegated duties and responsibilities and with written terms of reference. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises.
Audit Committee The Audit Committee has the primary responsibility for monitoring the quality of internal controls to ensure that the financial performance of the Group is properly measured and reported on. It receives and reviews reports from the Group’s management and external auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee will meet not less than three times in each financial year and will have unrestricted access to the Group’s external auditors. The Audit Committee is also responsible for ensuring the Company’s compliance with the NEX Exchange Rules. The members of the Audit Committee comprise not less than two independent non executive directors, and currently comprise Rupert Lowe (Chair) and Mike von Bertele.
Remuneration Committee The Remuneration Committee is responsible for determining and agreeing with the Board the framework and broad policy for the remuneration of all executive directors and the chairman of the Board, including pension rights and any compensation payments and such other members of the senior management as it is designated to consider. The Remuneration Committee makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any employee share option scheme or equity incentive plans in operation from time to time. The Remuneration Committee will meet as and when necessary but at least once each year. The members of the Remuneration Committee comprise not less than two independent non executive directors, and currently comprise Michael von Bertele (as Chair) and Rupert Lowe.
22 Nomination Committee At present the Company does not have a Nomination Committee and the functions that would normally be fulfilled by such a committee are currently undertaken by the Board as a whole. The Board intends to introduce a Nomination Committee with formally designated responsibilities within 12 months of Admission.
Clinical Governance Committee The Clinical Governance Committee is responsible for providing assurance to the Board on the quality and safety of care delivered to patients. The Committee will meet quarterly to review compliance with the Group’s governance framework, ensure that audit findings and actions are being addressed, and make necessary changes to policies. It will maintain a risk register for clinical and safety issues and bring to the attention of the Board, matters that require escalation. The membership of the Committee comprises a Non executive Director – Michael von Bertele (Chair), the Chief Medical Officer, Head of Professional Standards, Chief Physicist, Head of Radiotherapy and Head of Nursing. Lead members of sub committees dealing with all safety and clinical matters will report to the committee and may be in attendance.
The clinical governance framework The legal and regulatory framework which governs the Rutherford Cancer Centres requires full compliance with, inter alia, healthcare legislation that governs independent healthcare providers.
The Group’s Rutherford Cancer Centres in England are subject to the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014, and the Care Quality Commission (Registration) Regulations 2009. The regulating body for English sites is the Care Quality Commission (“CQC”). Independent healthcare in Wales, is regulated under the Care Standards Act 2000, which requires independent health care organisations to comply with the Independent Healthcare Regulations (Wales) 2011. Healthcare Inspectorate Wales is the regulatory body for health care in Wales (“HIW”).
Rutherford Cancer Centres in both England and Wales fall under the Ionising Radiation Medical Exposure Regulations 2017 (“IR(ME)R”). This regulation is inspected in England by the Care Quality Commission and in Wales by Healthcare Inspectorate Wales.
The Rutherford Cancer Centre South Wales, successfully registered to provide radiotherapy, as an independent clinic in 2017, following the registration inspection carried out by HIW. Two further registration inspections were successfully carried out to approve the centre for Systemic Anti Cancer Therapies (“SACT”) and proton beam therapy.
In December 2018, the Group received confirmation from the Procurement Service of the NHS Wales Shared Services Partnership, that the Rutherford Cancer Centre South Wales had successfully secured the contract to treat adult NHS patients who were eligible through the UK Proton Clinical Reference Panel for treatment of proton beam therapy. Under the Independent Healthcare Regulations (Wales) 2011, an independent clinic that treats patients under an NHS contract, no longer falls under these regulations and falls under the NHS contractual requirements for demonstrating compliance to the Health and Care Standards. The Rutherford Cancer Centre South Wales remains under the HIW inspection programme in relation to IR(ME)R.
The Rutherford Cancer Centre Thames Valley, and the Rutherford Cancer Centre North East, were successfully registered by the Care Quality Commission to provide radiotherapy, SACT and diagnostics in 2018.
Regulatory body registration inspections are carried out by teams led by the Registration Manager for the regulatory body and comprises specialist advisers that work in similar environments to the services delivered by Rutherford Cancer Centres. The purpose of the registration inspection is to assess compliance with the applicable legislation. Such legislation includes, and is not limited to, healthcare regulations, health and safety, data protection and ionising radiation regulations. Registration inspections involve a review of core policies and procedures that must be in place in respect of, inter alia, governance, recruitment, training, safeguarding, infection prevention, risk management, incident management, whistleblowing, medicine management, patient information, safety of premises and equipment. A physical inspection of the premises is undertaken, ensuring that premises are safe and are a welcoming environment for patients. Information for patients and visitors is reviewed to ensure those attending the centre have access to the necessary information about their treatment and care. Interviews with staff are undertaken to assess their knowledge and experience, and to review the patient pathway. Reviews of training records, building completion records, risk assessments and medical device registers are undertaken as part of the safety assessment.
23 Ensuring that a robust risk management framework is in place is essential for healthcare providers. The Group has established systems for the identification, reporting and monitoring of incidents and near miss events. Such incidents and near miss events may relate to matters such as events that could affect staff, patients, visitors and physical environments, non compliance with procedure, health and safety, reputation, quality and financial matters. It is common practice for healthcare providers in the UK to adopt the systems regarded as best practice and that have been implemented in the NHS. For these purposes, the Group uses the Datix Risk Management System which the Directors believe is used in 75 per cent. of NHS medical facilities. Through Datix systems, healthcare providers can adhere to a cyclical and well structured process for capturing, evaluating, strategising, implementing, and assessing all adverse events. The Group’s Datix system is managed by its Professional Standards Team which has experience of implementing the same Datix system over 300 locations in previous roles in independent healthcare. The Head of Professional Standards is a Lead Auditor for both ISO9001 and ISO27001 standards and leads the auditing function for the organisation.
In addition to the registration process as described above, individuals that hold the role of the‘Centre Manager’ in each individual Rutherford Cancer Centre, must go through an additional interview process with the regulatory body to assess their skills, knowledge, competence and fitness in relation to being responsible for managing a health care establishment. At Group level the Chief Medical Officer must also hold the role of ‘Nominated Individual’ (CQC) and ‘Responsible Individual’ (HIW) which are defined roles under healthcare regulations.
A key focus of demonstrating compliance with healthcare regulations is the demonstration of the leadership and governance of the healthcare establishment. The Group works within its “Pillars of Excellence” model which has been designed to ensure that it not only meet its regulatory requirements but strives to exceed these by the implementation of internationally recognised best practice such as the ISO9001 Quality Management Systems and Investors In People certification. The Group has established a Quality Governance framework which ensures that a set of defined Senior Management Teams, Committees and Expert Advisory Groups are in place which direct, monitor, and report on the quality and safety of treatment provided by the Group to the Board. A quality governance committee has been established in each Rutherford Cancer Centre which is responsible for, inter alia, the monitoring and assessment of outputs from audits, patient satisfaction, incidents, complaints, adverse events, training and compliance with policies and procedures. The Group has established a Group Quality Governance Committee that meets quarterly and is chaired by a Non executive Director to ensure that compliance and risks are visible to the Board along with a Clinical Governance Committee that is described above.
17. DIVIDEND POLICY The Directors do not intend that the Company will declare a dividend in the near term, but instead channel the available cash resources into funding the expansion of the Group. Thereafter, the Board intends to commence the payment of dividends only when it becomes commercially prudent to do so, having regard to the availability of distributable profits, the Group’s ongoing working capital requirements, the funds required to finance continuing future growth as well as other potential profitable uses for excess capital (such as share buy backs).
18. SHARE DEALING POLICY The Company has adopted a share dealing policy regulating trading and confidentiality of inside information for persons discharging managerial responsibility (“PDMRs”) and persons closely associated with them which contains provisions appropriate for a company whose shares are admitted to trading on NEX. The Company takes all reasonable steps to ensure compliance by PDMRs and any relevant employees with the terms of that share dealing policy.
19. TAXATION Your attention is drawn to the information on taxation relating to the Company and Shareholders in the UK contained in paragraph 16 of Part 4 of this document. If you are in any doubt as to your tax position, you should consult your own independent financial adviser immediately if you are resident in the UK or, if you are not resident in the UK, an appropriately authorised independent financial adviser in your own jurisdiction.
20. ADMISSION AND DEALINGS Application has been made to NEX Exchange for the entire issued share capital of the Company to be admitted to trading on NEX. It is expected that Admission will become effective and that dealings in the
24 Ordinary Shares will commence on 28 February 2019. The Ordinary Shares will be in registered form. The Articles permit the Company to issue Ordinary Shares in uncertificated form in accordance with the CREST Regulations. CREST is a computerised share transfer and settlement system. The system allows shares and other securities to be held in electronic form rather than paper form, although a Shareholder can continue dealing based on share certificates and notarial deeds of transfer. Share certificates, where applicable, will be sent to the registered Shareholder by the Registrar, at such Shareholder’s own risk.
Any individual wishing to buy or sell shares which are admitted to trading on the any of the markets operated by NEX Exchange, must do so through a NEX Exchange broker member.
21. DISSEMINATION OF REGULATORY NEWS The Company has arrangements in place to disseminate regulatory information to the market in accordance with the NEX Exchange Rules and applicable laws and regulation. Regulatory information relating to the Company is also available to the general public through the NEX Exchange website www.nexexchange.com.
22. THE TAKEOVER CODE As a company incorporated in England and Wales whose Ordinary Shares will be admitted to trading on NEX, the Takeover Code applies to the Company. Under Rule 9 of the Takeover Code (“Rule 9”), any person who acquires an interest in shares (as defined in the Takeover Code), whether by a series of transactions over a period of time or not, which (taken together with any interest in shares held or acquired by persons acting in concert (as defined in the Takeover Code) with him) in aggregate, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, that person is normally required by the Takeover Panel to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person which increases the percentage of shares carrying voting rights in which he is interested.
An offer under Rule 9 must be in cash or be accompanied by a cash alternative and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.
Under the Takeover Code, a concert party arises where persons who, pursuant to an agreement or understanding (whether formal or informal), co operate to obtain or consolidate control (as defined below) of a company or to frustrate the successful outcome of an offer for a company. “Control” means holding, or aggregate holdings, of shares carrying 30 per cent. or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control. A person and each of their affiliated persons will be deemed to be acting in concert with each other.
Further information on the provisions of the Takeover Code can be found in paragraph 6 of Part 4 of this document.
Woodford (and any person deemed to be acting in concert with it including LF Woodford Equity Income Fund (“WEIF”), Woodford Patient Capital Trust plc, Omnis Income & Growth Fund (“OIG”)) on the one hand and Wales Life Sciences Investment Fund on the other, together “the Concert Party”, are deemed to be acting in concert for the purposes of the Takeover Code. As at the date of this document, the Concert Party holds 65,543,478 Ordinary Shares representing 46.09 per cent. of the Company’s voting rights.
As more fully described below, following a subscription for 10,000,000 Ordinary Shares on Admission and a further 500,000 shares in consideration of a fee of £1,000,000, the Concert Party will come to hold 76,043,478 Ordinary Shares in aggregate representing an interest of 49.02 per cent. of the Company’s voting rights on Admission.
The Concert Party will therefore on Admission be interested in shares carrying more than 30 per cent. but will not hold more than 50 per cent. of the voting rights of the Company. Save as set out below, or with the consent of the Panel, any further increase in that aggregate interest in Shares will be subject to the provisions of Rule 9 of the Takeover Code.
25 Under the Woodford Commitment, Woodford, acting as agent for and on behalf of WEIF and OIG has given an irrevocable undertaking to subscribe at the request of the Company for up to new Ordinary Shares to a value of £80,000,000 at market price less 12 per cent., subject to a minimum subscription price of £1 per Ordinary Share no later than 31 August 2020. The key terms of the Woodford Commitment are set out in paragraph 11.6 of Part 4 of this document
Under the terms of the Woodford Commitment, Woodford has the right to allocate the Ordinary Shares among any of the funds that it manages. In order to illustrate the maximum percentage of voting rights the Concert Party could hold, it has been assumed that 60 million shares will be allocated to WPCT and 10 million to each of WEIF and OIG. However, this is only a representation of how the commitment may be allocated among the members of the Concert Party and should not be taken as how it will actually be allocated.
Assuming the Woodford Commitment were exercised in full on the above basis, the Concert Party would hold up to 156,043,478 Ordinary Shares representing 67.06 per cent. of the Company’s voting rights assuming no other Ordinary Shares are issued in the meantime. WEIF and OIG are each restricted to exercising no more than 19.50 per cent. of the voting rights in the Company. Accordingly, should either or both of WEIF and OIG have more than 19.50 per cent. of the Company’s issued share capital, they would each be limited to 19.50 per cent. of the Company’s voting rights and the other Shareholders would find their percentage voting rights scaled up accordingly.
On the basis described above, the Concert Party’s shareholdings, including the maximum possible position following exercise of the Woodford Commitment. Is set out below.
Maximum possible position following the leverage in full As at the date of the Woodford of this document At Admission Commitment Percentage Percentage Percentage of the of the of the Company’s Company’s Company’s Total Total Total Number of Voting Number of Voting Number of Voting shares Rights shares Rights shares Rights Woodford Patient Capital Trust plc 32,250,000 22.68% 32,250,000 21.45% 92,250,000 39.64% LF Woodford Equity Income Fund 22,173,913 15.59% 31,663,913 19.50%* 41,663,913 17.90% Omnis Income & Growth Fund 1,119,565 0.79% 2,129,565 1.42% 12,129,565 5.21% Wales Life Sciences Investment Fund 10,000,000 7.03% 10,000,000 6.65% 10,000,000 4.30% Total 65,543,478 46.09% 76,043,478 49.02% 156,043,478 67.06%
* 20.74 per cent. of the Issued Share Capital reduced to 19.50 per cent. of the voting rights as described above.
To the extent that the Concert Party’s interest in Ordinary Shares increases through a Rule 9 threshold as a result of the Woodford Commitment described above, the Takeover Panel has confirmed that any such increase would not trigger an obligation to make a mandatory offer pursuant to Rule 9 of the Takeover Code on the basis that the consequences of such increases have been fully disclosed in this document.
The Concert Party will, following the Woodford Commitment described above and assuming no other Ordinary Shares are issued in the meantime, be interested in shares carrying more than 50 per cent. of the voting rights of the Company. Accordingly, they will (subject to note 4 on Rule 9.1 of the Takeover Code) be able to acquire further interests in Ordinary Shares without incurring an obligation to make a general offer under Rule 9 of the Takeover Code.
In the event that the Company issues Ordinary Shares such that following the Woodford Commitment, the Concert Party is interested in shares carrying more than 30 per cent. but not more than 50 per cent. of the voting rights of the Company, save with the consent of the Panel, any acquisition by a member of the
26 Concert Party of a further interest in Ordinary Shares will be subject to the provisions of Rule 9 of the Takeover Code.
23. SHARE OPTION SCHEMES The Directors believe that the success of the Group will depend to a significant degree on the future performance of the management team. The Directors also recognise the importance of ensuring that all employees are well motivated and identify closely with the success of the Group. The Company has established a share option plan, the CSOP. Details of the CSOP are set out in paragraph 12 of Part 4 of this document of this document.
24. STATUS OF THE COMPANY PENDING REREGISTRATION AS A PLC The Company is at present constituted as a private company limited by shares. In order to re register as a public company limited by shares (“PLC”), one of the Companies Act requirements is that the Company’s net assets exceed its share capital and undistributable reserves. As at the date of this document, the Company is unable to satisfy this requirement. As at 31 January 2019, the unaudited interim financial statements show net assets of £97,603,000, share capital and undistributable reserves of £137,656,000, and £40,053,000 relating to carried forward losses.
By virtue of section 755 of the Companies Act, the Company may not as a private company offer to the public any securities of the Company. Since the Company wishes to become constituted as a PLC and to be able to offer securities to the public in the future, the Company intends at the earliest practicable opportunity, and in any event no later than 6 months from the date of Admission, to re register as a PLC and will communicate with Shareholders in due course the necessary steps and shareholder approvals required to effect such a re registration.
Notwithstanding its current status, the Board is satisfied that the Articles are generally consistent with those that typically apply to a PLC admitted to trading on NEX and, pending such re registration, the Board intends, as far as possible commensurate with their duties as directors, to observe (i) the additional procedural requirements under the Companies Act that apply to PLCs (but which do not apply to private companies) and (ii) the restrictions that apply to PLCs under the Companies Act where it would be in Shareholders’ interests to do so. The Board will, in any event, comply with PLC requirements in respect of, inter alia, the holding of annual general meetings, the laying of accounts before the annual general meeting, the annual appointment of auditors, the requirement to have a company secretary and the minimum number of directors.
In addition, as a company admitted to NEX, the Company will be subject to the Takeover Code and will be for at least 10 years after it ceases to be a publicly quoted company. Accordingly, the Directors consider that Shareholders have materially all the protections afforded to shareholders in PLCs pending re registration as a PLC.
25. FURTHER INFORMATION You should read the whole of this document, which provides additional information on the Group, and not just rely on the information contained in this Part 1. In particular, your attention is drawn to the risk factors in Part 2 of this document.
27 PART 2
RISK FACTORS
An investment in the Ordinary Shares is subject to a number of risks. Accordingly, prospective investors should consider carefully all of the information set out in this document and the risks attaching to such an investment, including in particular the risks described below (which are not set out in any order of priority), before making any investment decision in relation to any Ordinary Shares.
The information below does not purport to be an exhaustive list of relevant risks, since the Group’s performance might be affected by other factors including, in particular, changes in market and/or economic conditions or in legal, regulatory or tax requirements. Prospective investors should consider carefully whether an investment in Ordinary Shares is suitable for them in the light of information in this document and their individual circumstances. An investment in Ordinary Shares should only be made by those with the necessary expertise to fully evaluate that investment.
This document contains forwardlooking statements, which have been made after due and careful enquiry and are based on the Directors’ current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These forwardlooking statements are subject to, inter alia, the risk factors described in this Part 2. The Directors believe that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially. Each forward looking statement speaks only as of the date of the particular statement. Factors that might cause a difference include, but are not limited to, those discussed in this Part 2. Given these uncertainties, prospective investors are cautioned not to place any undue reliance on such forwardlooking statements. The Company disclaims any obligation to update any such forwardlooking statements in the document to reflect future events or developments.
Prospective investors are advised to consult an independent adviser authorised under FSMA. If any of the following risks relating to the Group were to materialise, the Group’s business, financial condition and results of future operations could be materially and adversely affected. In such cases, the market price of the Ordinary Shares could decline and an investor may lose part or all of their investment. Additional risks and uncertainties not presently known to the Directors, or which the Directors currently deem immaterial, may also have an adverse effect upon the Group. In addition to the usual risks associated with an investment in a company, the Directors consider the following risk factors to be significant to potential investors.
GENERAL RISKS General Investment risk An investment in the Company is only suitable for investors capable of evaluating the risks and merits of such investment and who have sufficient resources to bear any loss that may result from the investment. A prospective investor should consider with care whether an investment in the Company is suitable for him or her in the light of his or her personal circumstances and the financial resources available to him or her. The investment opportunity offered in this document may not be suitable for all recipients of this document. Investors are therefore strongly recommended to consult an investment adviser authorised under FSMA, or such other similar body in their jurisdiction, who specialises in advising on investments of this nature before making their decision to invest.
Investment in the Company should not be regarded as short term in nature. There can be no guarantee that any appreciation in the value of the Company’s investments will occur or that the commercial objectives of the Company will be achieved. Investors may not get back the full amount initially invested.
The prices of shares and the income derived from them can go down as well as up. Past performance is not necessarily a guide to future performance.
Any economic downturn either globally or locally in any area in which the Group operates may have an adverse effect on demand for the Group’s products. A more prolonged downturn may lead to an overall
28 decline in sales. Economic uncertainty might have an adverse impact on the Group’s operations and business results.
RISKS RELATING TO THE GROUP AND THE INDUSTRY IN WHICH IT OPERATES The business is highly sensitive to patient numbers The Group’s business is highly sensitive to the numbers of patients seeking treatment at its oncology centres and, in particular, patients receiving proton beam therapy. The numbers of patients being treated in the Group’s oncology centres will depend on the availability of funding from the NHS and insurance companies and on the number of people willing to pay for their own treatment. There can be no assurance that funding will be available to the extent anticipated or at all.
Although the Group has agreements with a number of major UK health insurance companies including WPA, AXA PPP, Vitality and BUPA, these agreements do not provide for guaranteed patient numbers.
Insurance companies may choose not to pay for patients to receive treatment at the Group’s centres, preferring to fund treatment at NHS facilities (where available) in the UK and overseas. In addition, there can be no guarantee that other centres will become established that offer proton beam therapy at more competitive rates.
A number of the Group’s initial patients have been self funded. There can be no guarantee that there will be a sufficient number arising from a lower than expected level of referrals from the NHS or funded by private health insurance companies.
Should the numbers of patients paying or being funded to receive treatment at the Group’s centres be affected by any of the foregoing or by other factors, the revenues, profits and the financial position of the Group would be materially and adversely affected.
Fee levels and reimbursement risks The Group has secured agreements with major UK health insurance providers as well as WHSSC and anticipates securing additional agreements in the future. These agreements set the prices at which the Group will be re imbursed for patients receiving treatment at the Group’s facilities. A number of patients have paid for treatment themselves and are expected to do so in the future.
The Group will need to renegotiate the service level terms, including prices, in the future and may be forced to reduce its prices in response to competition from other providers in the UK, including the NHS and from overseas. Should the prices for which it charges for its services be reduced, the financial performance of the Group could be materially and adversely affected.
Dependence on third party service providers The Group is reliant upon third party service providers for certain crucial aspects of its operations, most notably IBA for maintenance of its PBT equipment along with Philips and Elekta. Any interruption or deterioration in the performance of these third party service providers could impair the quality and sustainability of the Group’s services. In addition, if the contracts with any of these third party service providers are terminated, or any of the service providers become insolvent, the Group would probably find it difficult to find alternative outsource providers on a timely basis or on equivalent terms. The occurrence of any of these events could have a material adverse effect on the financial condition, results or operations of the Group.
Dependence on key executives and personnel and the ability to retain and recruit such personnel The Group’s future success is dependent on the continued services and continuing contributions of its Chief Executive Officer and its Chief Medical Officer, senior management and other key personnel the loss of any of whom could have a material adverse effect on the Group’s business. The Company’s future success is also substantially dependent on its ability to continue to attract, retain and motivate highly skilled and qualified personnel.
The Group’s success is dependent upon its continuing ability to recruit, train and retain radiation oncologists, physicians, physicists, dosimetrists and radiation therapists. The Group faces competition for such personnel from other healthcare providers, research and academic institutions, government entities and other organisations. In the event the Group is unable to recruit and retain these professionals, such shortages could have a material adverse effect on its ability to grow. Additionally, many of the Group’s senior radiation
29 oncologists, due to their reputations and experience, are very important in the recruitment and education of other radiation oncologists. The loss of any such senior radiation oncologists or physicians could negatively impact the Group. In this connection, the effect of Brexit, were it to happen, may be to reduce the number of skilled and qualified personnel from other European countries.
While employees of the Group are subject to employment agreements, these agreements do not preclude such employees from terminating their employment at any time, subject to notice periods. Furthermore, where such employees are subject to certain post termination restrictions such as competing with the Group and/or soliciting employees and/or customers, these may not be fully enforceable at law or may only apply for a limited time.
Competition The Group operates in a market where it faces competition from a number of other organisations, including the NHS, which offer various forms of cancer treatment. At present, however, the only organisation in the UK that offers proton beam therapy is the NHS although the Directors understand that there is one other commercial facility under construction in London. Other commercial organisations may decide to set up PBT facilities in competition to the Group. Some of the Group’s competitors may have greater financial and other resources than the Company and, as a result, may be in a better position to compete for future business opportunities. These competitors compete directly with the Group for both patients and employees. Larger competitors may be able to advertise their services more effectively on a regional, national or international basis and may offer more competitive prices than the Group. In addition, some competitors have a longer history of providing healthcare services than the Group and, therefore, may possess a relative advantage with regard to access to patient referrals. This competition could have a material adverse effect on the Group’s financial condition, results or operations as well as the Group’s ability to attract and retain highly skilled individuals. There can be no assurance that the Group can, or will be able to, compete effectively in the future.
Technology risks There is a risk that proton beam therapy does not prove as effective in general as the Directors currently anticipate or that it proves to be effective in a smaller number of cancers than they anticipate. There is also the risk that new and more effective and/or cost effective methods of treating cancer come to be developed. In any such circumstance, demand for the Group’s services could suffer and its financial performance deteriorate.
Reputational risks The long term financial performance of the Group will depend on its maintaining a high level of clinical performance, regulatory compliance and general media profile. Were the quality of treatment provided by the Group to fall below the quality provided elsewhere or if there were well publicised patient complaints or litigation whether with or without merit, the reputation of the Group could be adversely affected. Should this happen, self paying patients may choose to seek treatment elsewhere including overseas and health insurers and the NHS may reduce the numbers of patients being referred or stop referring patients completely. In any such eventuality, the financial and operating performance of the Group would be materially and adversely affected.
Should any part of the Group be subject to adverse press or media comment as a result of patient or staff complaint or mistreatment or as a result of any other matter, demand for the Group’s services could be adversely affected with a resultant adverse effect on the Group’s financial performance.
Healthcare litigation risks The Group will be treating patients with cancer. Whilst cancer is a serious and potentially fatal condition and in many cases the prognosis for patients is poor, if the Group does not provide patient care to the standard expected in the sector, it may face litigation from patients or their relatives. Should this happen, the Group could face substantial costs and damages and, in the event that it loses a court case, may not have its costs completely covered by its liability insurance. When faced by potential litigation, the Group may opt to settle claims out of court. In any of the foregoing eventualities, the Group may suffer material financial loss.
30 Regulatory compliance risks The healthcare sector is highly regulated and compliance with applicable regulations is costly. The Group’s activities are regulated primarily by the Care Quality Commission (“CQC”) in England and Healthcare Inspectorate Wales (“HIW”), is dependent on a number of authorisations to carry on its activities and has to comply with a number of regulations including the Ionising Radiation Medical Exposure Regulations (“IRMER”). CQC and HIW have broad regulatory powers dealing with all aspects of medical services, including the authority to make enquiries of companies regarding compliance with applicable regulations, to grant and, in specific circumstances, to vary or cancel permissions and to regulate business practices. If permissions were varied or cancelled, the Group could suffer material financial loss.
The regulators also have the right to conduct audits on demand and to publish the results of their audits on their website. Should an inspection or audit fail to satisfy the relevant regulator, it can publish an Improvement Notice which would involve time and cost in complying with the requirements specified and which could damage the Group’s reputation.
The regulatory environment in which the Group operates frequently changes and has seen significantly increased regulation in recent years, and there is a risk that this trend will continue for the foreseeable future. The Group may be materially adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. Changes to the regulatory environment could also increase the compliance costs of the Group.
Any changes in the laws and regulations governing the Group’s business, or revocation of relevant authorisations, could limit the services the Group is able to offer or the fees it is able to generate, or increase the costs of compliance. A revocation of the Group’s authorisation to provide healthcare services would have a very material impact on the Group’s financial condition and prospects and could force the Group to restructure its operations to continue its business.
Key system failure, disruption or interruption The Group is heavily reliant on its information technology systems to manage the provision of its cancer treatment services and its centres.
The Group depends on its ability to store, retrieve, process and manage a significant amount of information, and to provide its radiation treatment centers with efficient and effective accounting and scheduling systems. Its information systems require maintenance and upgrading to meet the Group’s needs, which could significantly increase its administrative expenses.
Furthermore, any system failure that causes an interruption in service or availability of the Group’s systems could adversely affect operations or delay the collection of revenues. Even though the Group has implemented network security measures, its servers are vulnerable to computer viruses, break ins and similar disruptions from unauthorised access. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, or cessations in the availability of systems, all of which could have a material, adverse effect on the Group’s financial position and results of operations and damage its business reputation.
The performance of the Group’s information technology and systems is critical to a number of critical areas of operations, including:
• clinical systems; medical records and document storage;
• accounting and financial reporting;
• billing and collecting accounts;
• compliance with regulations; and
• quality management.
The Group’s information technology systems could be damaged, disrupted and shutdown due to problems with upgrading software, power outages, hardware issues, viruses, cyber attacks, telecommunication failures, human error or other unanticipated events. Such damage, disruption or shutdown could, even on a temporary or short term basis, have a significant adverse effect on the Group’s operations. Additionally, security breaches may result in the unauthorised disclosure of confidential patient information which could adversely affect relationships with patients, health insurers and the NHS and damage the Group’s brands and
31 reputation as well as exposing the Group to liabilities for regulatory breaches in respect of data protection and other regulations. Although the Group has disaster recovery and backup systems in place, they may not adequately address every information technology risk and, in addition, the Group’s insurance may not cover all loss and damage that it may suffer as a result of a system failure. Power failure or loss of critical information technology systems could result in suspension of patient treatment and failure to fulfil treatment mandates which could lead to significant losses and reputational damage.
Protection of intellectual property At present the Group’s intellectual property is limited to its brands, designs and trademarks and its methodology. However, the Directors anticipate that as patient data accumulates, gets aggregated and analysed, the Group will develop proprietary knowledge that may be capable of receiving patent protection. Should the Group choose to seek patent protection for its discoveries, it will incur potentially substantial costs in registering patents and maintaining the registration thereof. Even if it succeeds in registering a patent, there can be no assurance that other parties will seek to circumvent or even breach the patent, resulting in substantial litigation costs for the Group, should it choose to seek compensation through the courts.
Financial controls and internal reporting procedures The Group’s future growth and prospects will depend on its ability to manage growth and to continue to maintain, expand and improve operational, financial and management information systems on a timely basis, whilst at the same time maintaining effective cost controls. Any damage to, failure of or inability to maintain, expand and upgrade effective operational, financial and management information systems and internal controls in line with the Group’s growth could have a material adverse effect on the Group’s business, financial condition and results of operations.
Existing shareholder influence Following Admission, the Woodford Funds will hold in aggregate 66,043,478 Ordinary Shares representing 43.25 per cent of the Company’s Issued Share Capital. In accordance with the Articles, however, the votes attaching to the Ordinary Shares held by either LF Woodford Equity Income Fund (“WEIF”) and Omnis Income and Growth Fund (“OIG”) are limited in each case to 19.50 per cent. of the Company’s total voting rights. WEIF will hold 20.71 per cent. of the Issued Share Capital following Admission and could, pursuant to the Woodford Commitment, come to hold a substantially higher percentage of the Company’s issued share capital. The holding of OIG Shares is currently substantially below that level. The holdings of WEIF and OIG are set out in paragraph 22 of Part 1 of this document. Should WEIF’s holding of Ordinary Shares exceed 19.50 per cent. of the Company’s issued share capital, WEIF’s voting rights would be reduced to 19.50 per cent. and other Shareholders would find their voting rights scaled up in proportion to their holdings.
Nonetheless, the Woodford Funds will continue to be in a position to have significant influence over the Company’s operations and business strategy including the ability to block special resolutions of the Company, although it is intended that this will be moderated by the terms of the Relationship Agreement.
The Company may not be able to reregister as a PLC The Directors intend that the Company re registers as a public limited company within six months of Admission. However, re registration will depend, inter alia, on the consent of Shareholders. Should Shareholders fail to pass the requisite resolutions, the Company would remain a private limited company. Consequently, its status as a quoted company could be placed in doubt and, while the Articles are broadly consistent with those of a PLC admitted to NEX, Shareholders would not have all the rights of a shareholder in a PLC.
New cancer centres The Group’s growth strategy depends in part on its ability to acquire and develop additional treatment centres on favorable terms. If it is unable to do so, its future growth could be limited and operating results could be adversely affected.
The Group may be unable to identify, negotiate and complete suitable acquisition and development opportunities on reasonable terms. The Directors expect that the Group will continue to add additional treatment centres but its ability to do so will depend on several factors, including: • its ability to obtain suitable locations for treatment centres;
32 • its ability to identify, recruit and retain a sufficient number of radiation oncologists and other healthcare professionals; • its ability to obtain adequate financing to fund such site acquisitions.
Following the establishment of new treatment centres, the Group may experience losses and lower gross revenues and operating margins during the initial periods of operating these newly developed treatment centers. Furthermore, integrating a new treatment center could be expensive and time consuming, and could disrupt the Group’s ongoing business and distract its management and other key personnel.
Potential requirement for further investment Any future expansion, activity and or business development may require additional capital, whether through equity or debt. There can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient. If additional funds are raised by issuing equity securities, dilution to the then existing Shareholders may result. If the Company is not able to obtain additional capital on acceptable terms, or at all, it may be forced to curtail or abandon such planned opportunities, expansion, activity and/or business development. The above could have a material effect on the Company.
Funding risks While the Group is funded primarily with equity, it also has substantial borrowings, amounting to approximately £24 million at 31 January 2019. Should the Group fail to generate sufficient positive cash flow, it could find itself unable to pay amounts due under its borrowing arrangements or could otherwise find itself in breach of borrowing covenants. If that were to happen, the Group could be forced to repay loans and may not have sufficient funds to do so. In any such eventuality, the future of the Group would be in doubt.
The Company is technically in breach of certain provisions of the Shawbrook facility that is described in paragraph 11.7 of Part 4 of this document. The Company has requested a waiver of such breaches and Shawbrook have indicated to the Company that they will grant such waiver. At the date of this document the Company has not received such waiver. The Company anticipates receiving such waiver in advance of Admission. It is possible that the waiver may be subject to different terms. If the waiver is not received or is subject to different terms, the Company may be required to call a greater amount under the Woodford Commitment
The Company is technically in breach of certain provisions of the WPA facility that is described in paragraph 11.8 of Part 4 of this document. The Company has requested a waiver of such breaches and WPA have indicated to the Company that they will grant such waiver or replace the facility. At the date of this document the Company has not received such waiver or replacement facility. It is possible that the waiver or replacement facility may be subject to different terms. If the waiver or replacement facility is not received or is subject to different terms the Company may be required to call a greater amount under the Woodford Commitment.
No profit to date The Company has incurred aggregate losses since its inception and it is therefore not possible to evaluate its prospects based on past performance. There can be no certainty that the Company will achieve or sustain profitability or achieve or sustain positive cash flow from its activities.
GENERAL BUSINESS RISKS Business strategy The value of an investment in the Company is dependent, inter alia, upon the Group achieving the aims set out in this document. Although the Company has a clearly defined strategy, there can be no guarantee that its objectives will be achieved or that the Company will achieve the level of success that the Directors expect. Furthermore, the Company may decide to change aspects of its strategy described in this document. The Company’s ability to implement its business strategy successfully may be adversely impacted by factors that the Company cannot currently foresee, such as unanticipated market forces, costs and expenses or technological factors. Should it be unsuccessful in implementing its strategy or should it take longer than expected to implement, the future financial results of the Group could be negatively impacted.
33 Taxation risk The Company is subject to taxation and the application of such taxes may change over time due to changes in laws, regulations or interpretations by the relevant tax authorities. Whilst no material changes are anticipated in such taxes, any such changes may have a material adverse effect on the Company’s financial condition and results of operations.
Legal risk Legal risks include the inability to enforce contractual arrangements, an absence of adequate protection for intellectual property rights, an inability to enforce foreign judgments relating to contracts entered into by the Group that are governed by law outside England and Wales, absence of a choice of law, and an inability to refer disputes to arbitration or to have a choice with regard to arbitration rules, venue and language. Mitigation measures for these risks may be limited.
The EU General Data Protection Regulation The EU General Data Protection Regulation (“GDPR”) came into force and has applied directly to the legislation of all EU Member States from 25 May 2018 and replaced historic EU data privacy laws. The GDPR introduced a number of new more stringent obligations on data controllers and rights for data subjects as well as new and increased fines and penalties for breaches of its data privacy obligations. This increasingly restrictive and complex legal framework has resulted in a greater compliance burden for businesses with customers in Europe. The Group has incurred, and will continue to incur, costs and effort to ensure compliance with the GDPR and this could further increase compliance costs for the Group going forward.
If the Group is found not to comply with the data protection laws and regulations (including the GDPR) this may result in investigative or enforcement action (including criminal proceedings and significant pecuniary penalties) by the Information Commissioner’s Office in the UK and/or claims (including possible class actions) being brought against it by affected customers. This in turn could damage the Group’s reputation, lead to negative publicity and result in the loss of the goodwill of its patients, insurance companies and the NHS, all of which would have a material adverse effect on the Group’s businesses, results of operations, financial condition and prospects.
Adequacy of insurance arrangements The Group’s business entails the risk of liability related to litigation from patients or third parties and actions taken by regulatory agencies. Specifically, there is a risk that claims may arise in relation to losses or damage resulting from the Group’s or its employees’ and/or agents’ errors, negligence, or misconduct. Although the Group maintains insurance against such risks of its employees or agents, there is no guarantee (i) that any insurance in place will cover all, or any part, of any liability incurred by the Group in any such circumstances, (ii) that any insurer will remain solvent and will meet its obligations to provide the Group with coverage, or (iii) that insurance coverage will continue to be available with sufficient limits at a reasonable cost. Renewals of insurance policies may expose the Group to additional costs through higher premiums or the assumption of higher deductibles or claims thresholds. The future costs of maintaining insurance cover or meeting liabilities not covered by insurance could have a material adverse effect on the Group’s business, results of operations, financial condition and growth prospects.
Economic conditions The Group could be affected by unforeseen events outside its control including economic and political events and trends, inflation and deflation or currency exchange fluctuation. Any economic downturn either globally or locally in any area in which the Group operates may have an adverse effect on the demand for the Group’s services. A more prolonged economic downturn may lead to an overall decline in the volume of the Group’s activities and sales, restricting the Group’s ability to realise a profit. The markets in which the Group offers its services are directly affected by many national and international factors that are beyond the Group’s control.
Force Majeure The Group’s operations now or in the future may be adversely affected by risks outside the control of the Group including labour unrest, civil disorder, war, terrorist attacks, subversive activities or sabotage, fires, floods, explosions or other catastrophes, epidemics or quarantine restrictions.
34 Brexit risk On 23 June 2016, the United Kingdom held a referendum on the United Kingdom’s continued membership of the European Union. This resulted in a vote for the United Kingdom to exit the European Union. There are significant uncertainties in relation to the terms on which such an exit will be effected and there are significant uncertainties as to what the impact will be on the fiscal, monetary and regulatory and legal landscape in the UK, including, amongst other things, the UK’s regulatory and tax system, the conduct of cross border business and export and import tariffs. There is also uncertainty in relation to how, when and to what extent these developments will impact on the economy in the UK and the future growth of its various industries and on levels of investor activity and confidence, on market performance and on exchange rates. There is also a risk that the vote by the UK to leave could result in other member states re considering their respective membership of the European Union. Although it is not possible to predict fully the effects of the UK’s exit from the European Union, any of these risks, taken singularly or in the aggregate, could have a material adverse effect on the availability of funding for treatment and therefore could affect the Group’s business, revenue, financial condition, profitability, results, prospects and/or future operations.
RISKS RELATING TO THE ORDINARY SHARES Investment risk The Group’s business is an innovative venture which has associated risks arising from the challenge of establishing a new brand, including the commercial risks associated with the investment in development and marketing. An investment in the Company is speculative, involves a considerable degree of risk and is suitable only for persons or entities which have substantial financial means and who can afford to hold their ownership interests for an indefinite amount of time or to lose the whole of their investment.
Share price volatility and liquidity NEX is an exchange designed principally for growth companies, and as such, tends to experience lower levels of trading liquidity than larger companies quoted on the Official List or some other stock exchanges. Following Admission, there can be no assurance that an active or liquid trading market for the Ordinary Shares will develop or, if developed, that it will be maintained. The Ordinary Shares may therefore be subject to large fluctuations on small volumes of shares traded. As a result, an investment in shares traded on NEX carries a higher risk than those listed on the Official List. Prospective investors should be aware that the value of an investment in the Company may go down as well as up and that the market price of the Ordinary Shares may not reflect the underlying value of the Company. There can be no guarantee that the value of an investment in the Company will increase. Investors may therefore realise less than, or lose all of, their original investment. The share prices of publicly quoted companies can be highly volatile and shareholdings illiquid. The price at which the Ordinary Shares are quoted and the price which investors may realise for their Ordinary Shares may be influenced by a large number of factors, some of which are general or market specific, others which are sector specific and others which are specific to the Company and its operations. These factors include, without limitation, (a) the performance of the overall stock market, (b) large purchases or sales of Ordinary Shares by other investors, (c) financial and operational results of the Group (d) changes in analysts’ recommendations and any failure by the Group to meet the expectations of the research analysts, (e) changes in legislation or regulations and changes in general economic, political or regulatory conditions, and (e) other factors which are outside of the control of the Group. Shareholders may sell their Ordinary Shares in the future to realise their investment. Sales of substantial amounts of Ordinary Shares following Admission and/or termination of the lock in restrictions (the terms of which are summarised in paragraph 11.5 of Part 4 of this document), or the perception that such sales could occur, could materially adversely affect the market price of the Ordinary Shares. There can be no guarantee that the price of the Ordinary Shares will reflect their actual or potential market value or the underlying value of the Company’s net assets and the price of the Ordinary Shares may decline below the price they paid. Shareholders may be unable to realise their Ordinary Shares at the quoted market price or at all.
Dilution of Shareholders’ interest as a result of additional equity fundraisings The Company may need to issue, pursuant to a public offer or otherwise, additional Ordinary Shares in the future at a price or prices higher or lower than the price investors may have paid. An additional issue of Ordinary Shares by the Company, or the public perception that an issue may occur, could have an adverse effect on the market price of Ordinary Shares and could dilute the proportionate ownership interest and the proportionate voting interest of Shareholders if, and to the extent that, such an issue of Ordinary Shares is not effected on a pre emptive basis or Shareholders do not take up their rights to subscribe for further
35 Ordinary Shares under a pre emptive offer. Shareholders may also experience subsequent dilution and/or such securities may have preferred rights, options and pre emption rights senior to the Ordinary Shares.
If the Company were to offer equity securities for sale in the future, Shareholders not participating in these equity offerings would become diluted and pre emptive rights may not be available to certain Shareholders. The Company may also in the future issue Shares, warrants and/or options to subscribe for new Shares, including (without limitation) to certain advisers, employees, and directors. The exercise of such warrants and/or options may also result in dilution of the shareholdings of other investors.
Costs of compliance with NEX corporate governance and accounting requirements In becoming a publicly quoted company, the Group will be subject to enhanced requirements in relation to disclosure controls and procedures and internal control over financial reporting. The Group may incur significant costs associated with its public company reporting requirements, including costs associated with applicable NEX corporate governance requirements. The Group expects to incur significant legal and financial compliance costs as a result of these rules and regulations. If the Group does not comply with all applicable legal and regulatory requirements, this could result in regulatory investigations which could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.
There is no guarantee that the Group will maintain its quotation on NEX The Group cannot assure investors that the Group will always retain a quotation on NEX. If it fails to retain such a quotation, investors may find it very difficult to sell their shares. Additionally, if in the future the Group decides to obtain a quotation on another exchange in addition to or in place of NEX, the level of liquidity of the Ordinary Shares could decline.
Dividends There can be no assurance that the Company will declare dividends or as to the level of any dividends. The approval of the declaration and amount of any dividends of the Company is subject to the discretion of the Directors (and, in the case of any final dividend, the discretion of Shareholders) at the relevant time and will depend upon, among other things, the Group’s earnings, financial position, cash requirements and availability of distributable profits, as well as the provisions of relevant laws and/or generally accepted accounting principles from time to time.
The future performance of the Company cannot be guaranteed There is no certainty and no representation or warranty is given by any person that the Group will be able to achieve any returns referred to in this document or elsewhere. The financial operations of the Group may be adversely affected by general economic conditions, by conditions within the UK stock market generally or by the particular financial condition of other parties doing business with the Group.
If the Group’s revenues decline, do not grow, or grow more slowly than anticipated, or if its operating or capital expenditures exceed expectations and cannot be adjusted for sufficiently, the market price of the Company’s shares may fall. In addition, if the market for securities of companies in the same sector or the stock market in general experiences a loss in investor confidence or otherwise falls, the market price of the Ordinary Shares may fall for reasons unrelated to the Group’s business, results of operations or financial condition.
It should be noted that the risk factors listed above are not intended to be exhaustive and do not necessarily comprise all of the risks to which the Group is or may be exposed or all those associated with an investment in the Company. In particular, the Group’s performance is likely to be affected by changes in market and/or economic conditions, political, judicial, and administrative factors and in legal, accounting, regulatory and tax requirements in the areas in which it operates. There may be additional risks and uncertainties that the Directors do not currently consider to be material or of which they are currently unaware which may also have an adverse effect upon the Group.
If any of the risks referred to in this Part 2 were to crystallise, the Group’s business, financial condition, results or future operations could be materially adversely affected. In such case, the price of its Ordinary Shares could decline and investors may lose all or part of their investment.
Although the Directors will seek to minimise the impact of the risk factors listed above, investment in the Company should only be made by investors able to sustain a total loss of their investment.
36 PART 3
UNAUDITED INTERIM FINANCIAL INFORMATION ON THE GROUP
Consolidated Statement of Total Comprehensive Income for the 11 months ended 31 January 2019
2019 Notes £’000 Revenues 3 1,111 Cost of Sales (2,333) Gross margin (1,222) Administrative expenses (15,739) Operating loss (16,961) Finance income — Finance expense (1,624) Loss before income tax (18,585) Income tax credit443 Loss for the period (18,542)
Other comprehensive loss Loss on investment (4,163) Total comprehensive loss for the period (22,705) Loss and total comprehensive losses attributable to: Equity holders of the Company (22,705)
37 Consolidated Statement of Financial Position As at 31 January 2019
31 January 28 February 2019 2018 Notes £’000 £’000 ASSETS Noncurrent assets Property, plant and equipment 5 135,005 98,081 Intangible assets 6 560 — Investments 7—4,163 Deferred tax asset 2,801 2,801 Noncurrent assets 138,366 105,045
Current assets Trade and other receivables 5,205 7,210 Current tax receivable — 31 Cash and cash equivalents 1,396 6,695
Current assets 6,601 13,936 Total assets 144,967 118,981
Equity attributable to the Company’s equity holders Share capital 8 136 121 Share premium account 137,520 111,309 Other comprehensive loss (4,163) — Retained earnings (35,890) (17,416)
Total equity 97,603 94,014
LIABILITIES Noncurrent liabilities Borrowings 9 24,372 13,149
Current liabilities Trade and other payables 10 22,992 11,818 Current liabilities 22,992 11,818 Total liabilities 47,364 24,967 Net equity and liabilities 144,967 118,981
38 Consolidated Cash Flow Statement for the 11 months ended 31 January 2019
2019 Note £’000 Cash flows from operating activities Net cash utilised in operations 11 70 Net cash used in operating activities 70
Cash flows from investing activities Purchase of property, plant and equipment (39,701) Purchase of intangibles (39) Net cash used in investing activities (39,740)
Cash flows from financing activities Proceeds from issue of shares 25,545 Net proceeds from issue of new loans 10,519 Lease payments (75) Interest paid (1,618) Net cash generated from financing activities 34,371
Net decrease in cash and cash equivalents (5,299) Cash and cash equivalents at the start of the period 6,695 Cash and cash equivalents at the end of the period 1,396
39 Consolidated Statement of Changes in Equity for the 11 months ended 31 January 2019
Ordinary Share share premium Retained capital account earnings Total £’000 £’000 £’000 £’000 Balance at 28 February 2017 107 97,548 (8,789) 88,866 Comprehensive income Loss for the period ——(8,679) (8,679) Total comprehensive expense ——(8,679) (8,679)
Transactions with owners Proceeds of share issues 14 14,486 — 14,500 Less costs of share issues — (725) — (725) Share based payment ——52 52 14 13,761 52 13,827 Balance at 28 February 2018 121 111,309 (17,416) 94,014
Comprehensive income Loss for the period ——(22,705) (22,705) Total comprehensive expense ——(22,705) (22,705)
Transactions with owners Proceeds of share issues 15 26,841 — 26,856 Less costs of share issues — (630) — (630) Share based payment ——68 68 Total transactions with owners 15 26,211 68 26,294 Balance at 31 January 2019 136 137,520 (40,053) 97,603
40 Notes to the Interim Financial Information for the 11 months ended 31 January 2019
1. General Information The interim financial information is unaudited.
Proton Partners International Limited is a private limited liability company incorporated and domiciled in England and Wales. The Group’s business activities are principally the construction of medical facilities and the provision of clinical treatment.
The address of the registered office is 15 Bridge Street, Hereford HR4 9DF.
2. Basis of preparation and Accounting Policies
Basis of preparation The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK private companies, in the preparation of this eleven months report.
This condensed, consolidated interim financial information for the eleven months ended 31 January 2019 does not comply, therefore with all the requirements of IAS 34, “Interim financial reporting” as adopted by the European Union. The consolidated interim financial information should be read in conjunction with the annual financial statements of Proton Partners International Limited for the year ended 28 February 2018, which have been prepared in accordance with IFRS as adopted by the European Union.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 28 February 2018 were approved by the Board on 29 November 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006.
Accounting policies The accounting policies used in the preparation of the financial information for the eleven months ended 31 January 2019 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and are consistent with those which will be adopted in the annual statutory financial statements for the year ended 28 February 2019.
While the financial information included has been prepared in accordance with the recognition and measurement criteria of IFRS, as adopted by the EU, these financial statements do not contain sufficient information to comply with IFRSs.
Basis of consolidation These interim consolidated financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 31 January 2019. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control may cease. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
3. Revenue from contracts with customers The Group has recognised the following amounts relating to revenue in the Statement of Comprehensive Income:
11 months ended 31st January 2019 £’000 Revenue from contracts with customers 1,111
All revenues arose in the United Kingdom and from the principle activity of the Group.
41 Revenues are recognised in line with delivery of treatment to patients. A patients treatment typically consists of multiple visits, and the revenue per patient is earned and recognised gradually over the course of the treatment.
4 Taxation
The current tax credit for the eleven months to 31 January 2019 is £43,000.
The deferred tax charge for the eleven months to 31 January 2019 is £nil.
5. Property, plant and equipment Rights Assets Freehold Plant & IT Fixtures Motor of Use under Property Machinery Equipment & Fittings Vehicles Assets constructon Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cost At 28 February 2018 4,262 3,718 1,338 377 11 490 89,289 99,485 Additions ——560 372 — 334 38,768 40,034 CIP Reclassification — 63,573 ————(63,573) — Disposals —————— — At 31 January 2019 4,262 67,291 1,898 749 11 824 64,484 139,519 Accumulated Depreciation At 28 February 2018 383 99 717 105 9 89 — 1,404 Charge for the period 121 2,294 396 146 2 151 — 3,110 At 31 January 2019 504 2,393 1,113 251 11 240 — 4,514
Net book value At 31 January 2019 3,758 64,898 785 498 — 584 64,484 135,005 At 28 February 2018 3,879 3,619 621 272 2 401 89,289 98,081
6. Intangible Assets Intellectual Property Group £’000 Cost At 28 February 2018 0 Acquisition of IP 720 At 31 January 2019 720 Depreciation At 28 February 2018 0 Charge for the period 160 At 31 January 2019 160 Net book value At 31 January 2019 560 At 28 February 2018 —
42 7. Investments
Group Trade Investments Fair value £’000 At 1 March 2016 — Additions 4,163 At 28 February 2017 4,163 Additons — At 28 February 2018 4,163 Impairment 4,163 At 31 January 2019 —
Trade Investments Trade Investments are classified as financial assets at FVOCI.
Trade Investments comprise of:
£’000 Proton Partners International Healthcare Investments LLC —
The Group has decided to Impair the Trade Investment due to the current performance of the asset not meeting expectations.
The Group continues to own the asset, and upon divestment any gain will be reclassified to retained earnings, and not reclassified to profit or loss.
8. Share Capital Number of Shares £’000 Ordinary Growth Deferred Ordinary Growth Deferred shares shares shares shares shares shares Total
At 1 March 2016 71,000,000 ——71 ——71 Issued in the period 36,195,652 ——36 ——36
At 29 February 2017 107,195,652 ——107 ——107 Issued in the period 35,652,174 5,188,833 — 36 4—40 Redesignated 22,173,913 — 22,173,913 (22) — 22 — Repurchased ——22,173,913 ——(22) (22)
At 28 February 2018 120,673,913 5,188,833 — 121 4—125 Issued in the period 15,452,175 740,588 —15——15
At 31 January 2019 136,126,088 5,929,391 — 136 4 — 140
43 9. Borrowings Group 2019 £’000 Noncurrent Loans 23,692 Lease liabilities 680 24,372
Loans Group 2019 £’000 Repayable in: Less than one year 3,915 One to two years 4,417 Two to five years 16,823 More than five years Total Repayable 25,155 Less: Unamortised debt issue costs (1,463) Carrying Value 23,692
Leases Group 2019 £’000 Repayable in: Less than one year 150 One to two years 384 Two to five years 49 More than five years 97 Total Repayable 680 Carrying Value 680
44 10. Trade and other payables Group 2019 £’000 Trade and other payables Trade payables 21,569 Accrued expenses 1,421 Other creditors 2 Total trade and other payables 22,992
All trade and other payables are classified as other financial liabilities held at amortised cost.
11. Cash used in operations £’000 Loss before income tax (18,542) Adjustments for Depreciation 3,110 Loan amortisation 440 Non cash employee benefits expense – Share based payments 68 Interest charge 1,624 Intangible amortisation 160 Write off current tax asset 31 Changes in Working Capital Trade and other payables 11,174 Trade and other receivables 2,005 Cash used in operations 70
45 PART 4
ADDITIONAL INFORMATION
1. RESPONSIBILITY The Directors, whose names are set out on page 6 of this document, and the Company, accept responsibility, both individually and collectively, for the information contained in this document. To the best of the knowledge and belief of the Directors and the Company (each of whom have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
2. INCORPORATION AND STATUS OF THE COMPANY 2.1 The Company was incorporated in England and Wales under the Act on 4 February 2015 as a private company limited by shares under the name Proton Partners International Limited with registered number 09420705.
2.2 The liability of the Shareholders is limited. The principal legislation under which the Company was formed and operates is the Act.
2.3 The registered office of the Company is at 15 Bridge Street, Hereford, United Kingdom, HR4 9DF. Its telephone number is 01432 268968.
3. THE GROUP AND ITS SUBSIDIARIES 3.1 The Company is the holding company of the Group which comprises the Company and the following wholly owned subsidiaries:
Percentage of issued Registered Country of share capital Name number Principal activity incorporation held Rutherford Diagnostics 10844984 Providing diagnostics England & Wales 100% Limited services Rutherford Estates Limited 10676819 Property development England & Wales 100% company Rutherford Infrastructures 11749069 Development and England & Wales 100% Limited infrastructure Rutherford Innovations 10676791 Technical testing England & Wales 100% Limited and analysis Rutherford Cancer Care 10680302 Provision of England & Wales 100% Limited cancer treatment
3.2 At the date of this document the Company, save for the subsidiaries referred to above and a trade investment in Proton Partners International Healthcare Investment LLC, has no interest in any other company.
4. SHARE CAPITAL OF THE COMPANY 4.1 On incorporation, one ordinary share of £1 per share was issued to Mike Moran as subscriber, at a subscription price of £1.00.
4.2 On 16 March 2015, each ordinary share of £1 was subdivided into 1,000 ordinary shares of 0.1 pence each (“Ordinary Shares”).
4.3 On 16 March 2015, 10,999,000 Ordinary Shares were issued at a subscription price of 0.1 pence per Ordinary Share.
4.4 On 08 June 2015, the Company increased its share capital by the issue of 50,000,000 Ordinary Shares for cash at a subscription price of £1.00 per Ordinary Share.
46 4.5 On 17 December 2015, the Company increased its share capital by the issue of 5,000,000 Ordinary Shares for cash at a subscription price of £1.00 per Ordinary Share.
4.6 On 10 February 2016, the Company increased its share capital by the issue of 5,000,000 Ordinary Shares for cash at a subscription price of £1.00 per Ordinary Share.
4.7 On 25 April 2016, the Company increased its share capital pursuant to a placing whereby a further 7,000,000 Ordinary Shares were issued for cash at a subscription price of £1.00 per Ordinary Share.
4.8 On 25 July 2016, the Company increased its share capital pursuant to a placing whereby a further 500,000 Ordinary Shares were issued for cash at a subscription price of £1.00 per Ordinary Share.
4.9 On 25 October 2016, the Company issued 8,695,652 Ordinary Shares for cash at a subscription price of £1.15 per Ordinary Share.
4.10 On 20 January 2017, the Company issued 20,000,000 Ordinary Shares for cash at a subscription price of £1.15 per Ordinary Share.
4.11 On 06 March 2017, the Company issued 5,188,833 Growth Shares for cash at a subscription price of 7.8 pence per Ordinary Share.
4.12 On 27 March 2017, the Company issued 4,347,826 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.13 On 24 April 2017, the Company issued 1,304,348 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.14 On 09 August 2017, the Company issued 869,566 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.15 On 23 March 2018, the Company issued 6,956,522 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.16 On 26 March 2018, the Company issued 4,782,609 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.17 On 30 April 2018, the Company issued 869,565 Ordinary Shares at a subscription price of £1.15 per Ordinary Share.
4.18 On 17 September 2018, the Company issued 740,588 Growth Shares. These were issued nil paid at a price of £0.458 per Ordinary Share.
4.19 On 29 August 2018, the Company issued 2,500,000 Ordinary Shares at a subscription price of £2.00 per Ordinary Share.
4.20 On 26 October 2018, the Company issued 2,500,000 Ordinary Shares at a subscription price of £2.00 per Ordinary Share.
4.21 On 27 November 2018, the Company issued 1,500,000 Ordinary Shares at a subscription price of £2.00 per Ordinary Share.
4.22 On 19 December 2018, the Company issued 800,000 Ordinary Shares at a subscription price of £2.00 per Ordinary Share.
4.23 On 4 January 2019, the Company issued 2,500,000 Ordinary Shares at a subscription price of £2.00 per Ordinary Share.
4.24 On 14 February 2019, the Company issued 341,000 Ordinary Shares at a price of £2.00 per Ordinary Share.
4.25 On 14 February 2019, the Company bought back 194,582 Growth Shares.
4.26 On Admission, the 5,734,809 Growth Shares shall automatically convert into 5,734,809 Ordinary Shares.
47 4.27 Pursuant to the Woodford Commitment, the Company shall issue 10,000,000 Ordinary Shares at a price of £2.00 per Ordinary Share and 500,000 Ordinary Shares in consideration of an arrangement fee of £1,000,000.
4.28 The issued, fully paid, share capital of the Company (i) as at the date of this document and (ii) immediately following Admission is as follows:
As at the date of Immediately following this document Admission Aggregate Aggregate nominal nominal Number of value Number of value Class shares (£) Shares (£) Ordinary Shares 136,467,088 £136,467.088 152,701,897 £152,701.897 Growth Shares 5,734,809 £5,734.809——
4.29 The Ordinary Shares have attached to them full voting, dividend and capital distribution (including on winding up) rights, but do not confer any rights of redemption, and are subject to the rights and restrictions set out in the Articles which are summarised in paragraph 5 below.
4.30 In accordance with the articles of association of the Company adopted at the time the Growth Shares were issued (“Old Articles”), each holder of Growth Shares will enter into a restricted share agreement with the Company prior to and conditional on Admission (“RSA”). The terms of the RSA provide that the Ordinary Shares into which the Growth Shares convert (such conversion being in accordance with the Old Articles), cannot be sold, transferred or otherwise encumbered until such time as the market capitalisation of the Company is equal to or exceeds £310,000,000 (“Hurdle”). If the Hurdle is met, the RSA automatically terminates. If the Hurdle has not been met by the eighth anniversary of the date of Admission, the Ordinary Shares will be subject to a deemed transfer notice, with a transfer price equal to the original subscription price paid for the Growth Shares. The RSA also contains good leaver and bad leaver provisions to reflect the position set out in the Old Articles. It should be noted that the anticipated opening market capitalisation of the Company on NEX will be £344 million.
4.31 As at the date of this document Options are outstanding over a total of 3,353,038 Ordinary Shares at exercise prices of between £1.00 and £2.00 per share. The number of Ordinary Shares subject to such outstanding Options will remain the same immediately following Admission. Further details of the Options are set out in paragraphs7and 12 of this Part 4.
4.32 The Ordinary Shares are in registered form and may be held either in certificated form or in uncertificated form through CREST. The Articles permit the Company to issue shares in uncertificated form.
4.33 Save for the Options, the Company does not have in issue any securities not representing share capital and there are no outstanding securities in issue by the Company.
5. ARTICLES OF ASSOCIATION 5.1 The Articles, to be adopted by a special resolution of the Company subject to and with effect from Admission, are available for inspection at the address specified in paragraph 2.3 of this Part 4 contain certain provisions, the material provisions of which are set out below. This is a description of significant rights and does not purport to be complete or exhaustive.
5.2 The Company has unrestricted objects.
5.3 Share capital and rights (a) Meetings of Members Subject to the requirement to convene and hold annual general meetings in accordance with the requirements of the Act, the Board may call general meetings whenever and at such times and places as it shall determine and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene an extraordinary general meeting in accordance with the requirements of the Act.
48 An annual general meeting shall be called by at least 21 clear days’ notice. All other general meetings shall be called by at least 14 clear days’ notice. Subject to the provisions of the Articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to each of the directors and the auditors for the time being of the Company. The notice shall specify the time and place of the meeting and, in the case of special business, the general nature of such business. The accidental omission to give notice of a meeting, or to send a form of proxy with a notice where required by the Articles, to any person entitled to receive the same, or the non receipt of a notice of meeting or form of proxy by any person, shall not invalidate the proceedings of that meeting.
The directors may from time to time make such arrangements for the purpose of controlling the level of attendance as they shall in their absolute discretion consider appropriate.
The appointment of a proxy shall be executed by or on behalf of the appointer. Delivery of a proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned. A member may appoint more than one proxy to attend on the same occasion.
A corporation or corporation sole which is a member of the Company may authorise such person as it thinks fit to act as its representative at any meeting of the Company or at any separate meeting of the holders of any class of shares.
(b) Voting Rights At a general meeting of the Company, subject to any special rights or restrictions attached to any class of shares (including the rights given to the WEIF Shares (any shares held by LF Woodford Equity Income Fund or its nominee (“WEIF”)) and OIG Shares (any shares held by Omnis Income & Growth Fund or its nominee (“OIG”)) as detailed below):
(i) on a show of hands every member present in person has one vote, every duly appointed proxy present has one vote (unless he has been appointed by more than one member and has been instructed by one or more members to vote for a resolution and by one or more other members to vote against it, in which case he has one vote for and one vote against the resolution) and any person duly appointed to act as the authorised representative of a corporate member (or each of them if more than one) has one vote; and
(ii) on a poll every member has one vote for every share held by him.
No Shareholder will be entitled to vote at a general meeting or any separate meeting of the holders of any class of shares in the Company in respect of any share held by him unless all moneys presently owed to the Company have been paid.
The WEIF Shares will each have one vote per share provided that if at any time prior to exit the WEIF Shares constitute more than 19.5 per cent. of the total voting share capital of the Company, the votes attaching to the WEIF Shares shall be limited to in aggregate to 19.5 per cent. of the total number of votes, such votes to be split equally on a fractional basis amongst the WEIF Shares.
The OIG Shares will each have one vote per share provided that if at any time prior to exit the OIG Shares constitute more than 19.5 per cent. of the total voting share capital of the Company, the votes attaching to the OIG Shares shall be limited in aggregate to 19.5 per cent. of the total number of votes, such votes to be split equally on a fractional basis amongst the OIG Shares.
(c) Preemption rights The following pre emption rights apply other than in respect of allotments:
(i) to WEIF and OIG (“Investors”) pursuant to any right of the Company existing prior to the Admission Date to call for subscriptions from the Investors; and
(ii) of equity securities amounting to a total in nominal value of £15,000 in respect of any allotments, other than any pursuant to the above, following the Admission Date;
49 Equity securities must not be allotted to any person on any terms unless the Company:
(i) has made an offer to each person who holds ordinary shares in the Company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the ordinary share capital of the Company, and
(ii) the period during which any such offer may be accepted has expired or the Company has received notice of the acceptance or refusal of every offer so made.
(d) Alteration of Capital The Company may from time to time by ordinary resolution:
(i) increase its capital as the resolution shall prescribe;
(ii) consolidate and divide all or any of its shares into shares of larger amount;
(iii) sub divide all or any of its shares into shares of smaller amount and attach varying rights to the shares resulting from such sub division; and
(iv) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled.
The Company may by special resolution reduce its share capital, any capital redemption reserve fund and any share premium account subject to the provisions of the Act.
(e) Variation of Rights All or any of the special rights for the time being attached to any class of shares for the time being issued may be varied or abrogated with the consent in writing of the holders of three quarters in nominal value of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate general meeting of such holders (but not otherwise). At every such separate general meeting the necessary quorum shall be not less than two persons holding or representing by proxy not less than one third in nominal amount of the issued shares of the class or, at any adjourned meeting of such holders, one holder who is present in person or by proxy, whatever the amount of his holding, shall be deemed to constitute a meeting.
(f) Purchase of Own Shares Subject to the provisions of the Act and to the sanction by an extraordinary resolution passed at a separate class meeting of the holders of any convertible shares, the Company may purchase any of its own shares of any class (including redeemable shares) at any price.
(g) Transfer of Shares Any member may transfer all or any of his shares. Save where any rules or regulations made under the Act permit otherwise, the instrument of transfer of a share shall be in any usual form or in any other form which the Board may approve and shall be executed by or on behalf of the transferor and (in the case of a share which is not fully paid) by the transferee. The Board may in its absolute discretion and without giving any reason decline to register any transfer of shares which are not fully paid or on which the Company has a lien.
(h) Dividends and other distributions The Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board. The Board may pay interim dividends if it appears that they are justified by the financial position of the Company.
All dividends shall be apportioned and paid pro rata to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid.
50 Any dividend unclaimed after a period of twelve years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company. The Board may, if authorised by an ordinary resolution of the Company, offer members the right to elect to receive shares credited as fully paid in whole or in part, instead of cash, in respect of the dividend specified by the ordinary resolution. The Company may cease to send any cheque or dividend warrant through the post if such instruments have been returned undelivered or remain uncashed by a member on at least two consecutive occasions. The Company shall recommence sending cheques or dividend warrants if the member claims the dividend or cashes a dividend warrant or cheque. In a winding up, the liquidator may, with the sanction of an extraordinary resolution and subject to the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and/or vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as the liquidator determines.
(i) Restrictions on Shares If the Board is satisfied that a member or any person appearing to be interested in shares in the Company has been duly served with a notice under Section 793 of the Act and is in default in supplying to the Company the information thereby required within a prescribed period after the service of such notice the Board (of the Company) may serve on such member or on any such person a notice (“a direction notice”) in respect of the shares in relation to which the default occurred (“default shares”) directing that a member shall not be entitled to vote at any general meeting or class meeting of the Company. Where default shares represent at least 0.25 per cent. of the class of shares concerned the direction notice may in addition direct that any dividend (including shares issued in lieu of a dividend) which would otherwise be payable on such shares shall be retained by the Company without liability to pay interest and no transfer of any of the shares held by the member shall be registered unless it is a transfer on sale to a bona fide unconnected third party, or by the acceptance of a take over offer or through a sale through a recognised investment exchange as defined in the Financial Services and Markets Act 2000. The prescribed period referred to above means 14 days from the date of service of the notice under Section 793 where the default shares represent at least 0.25 per cent. of the class of shares concerned and 28 days in all other cases.
(j) Overseas Shareholders Amember whose registered address is not within the United Kingdom and who gives to the Company a postal address within the United Kingdom for the purposes of communicating with him, or an address for the purpose of communicating with him by electronic means, shall be entitled to have notices sent to him at that address, but otherwise: (i) no such member shall be entitled to receive any notice from the Company; and (ii) without prejudice to the generality of the foregoing, any notice of general meeting of the Company which is in fact given or purports be given to such members shall be ignored for the purpose of determining the validity of the proceedings at such general meeting. 5.4 Directors (a) General At every annual general meeting of the Company any director who was appointed by the Board or who was not appointed or re appointed at one of the previous two annual general meetings must retire from office. A director who retires at an annual general meeting shall be eligible for re election.
Save as provided below, a director shall not vote at a meeting of the Board or any committee of the Board on any resolution of the directors concerning a matter in which he has an interest which together with any interest of any person connected with him is to his knowledge a material interest. The Company may by ordinary resolution suspend or relax such provisions to any extent or ratify any transaction not duly authorised by reason of a contravention of such provisions.
51 The prohibition in the paragraph above shall not apply to a director in relation to any of the following matters, namely: (i) the giving of any guarantee, security or indemnity to him in respect of money lent or obligations incurred by him for the benefit of the Company or any of its subsidiaries; (ii) the giving of any guarantee, security or indemnity to a third party in respect of an obligation of the Company or any of its subsidiaries for which he has assumed responsibility in whole or part and whether alone or jointly with others under a guarantee or indemnity or by giving of security; (iii) the subscription for or underwriting or sub underwriting of any shares, debentures or other securities of the Company or any of its subsidiaries by him; (iv) any proposal concerning any other company in which he and any persons connected with him do not to his knowledge hold an interest in shares representing one per cent or more of either any class of the equity share capital or the voting rights in such company); (v) any resolution relating to an arrangement for the benefit of employees of the Company or any of its subsidiaries and which does not provide in respect of any director as such any privilege or benefit not accorded to the employees to whom the arrangement relates; and (vi) any proposal concerning the purchase and/or maintenance of any insurance policy against liability for negligence, default, breach of duty or breach of trust in relation to the Company under which he may benefit.
The directors shall be paid such remuneration (by way of salary, commission, participation in profits or otherwise) as any committee authorised by the Board may determine and either in addition to or in lieu of his remuneration as director. The directors shall also be entitled to be repaid by the Company all hotel expenses and other expenses of travelling to and from board meetings, committee meetings, general meetings or otherwise incurred while engaged in the business of the Company or his duties as director, including the attendance of any spouse or civil partner where such spouse or civil partner accompanies a director for the purpose of advancing the business of the Company. Any director who by request of the Board performs special services or goes or resides abroad for any purposes of the Company may be paid such extra remuneration by way of salary, percentage of profits or otherwise as the board may determine.
The Company may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, to or for the benefit of past directors who held executive office or employment with the Company or a predecessor in business of any of them or to or for the benefit of persons who are or were related to or dependants of any such directors.
Unless otherwise determined by ordinary resolution of the Company, the number of directors shall not be less than four nor more than nine.Adirector shall not be required to hold any shares of the Company by way of qualification. The Board may appoint a person as a director who is willing to act in that capacity and the Investors may collectively appoint any person to be a director and remove the same so long as there shall not be more than one such appointed director at any time.
(b) Borrowing Powers The directors may exercise all the powers of the Company to borrow money, to guarantee, to indemnify and to mortgage or charge its undertaking, property, assets (present and future) and uncalled capital, and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
(c) Permitted interests Provided that he has disclosed to the directors the nature and extent of any material interest of his, a director notwithstanding his office:
(i) may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise interested;
(ii) may act by himself or his firm in a professional capacity for the Company (otherwise than as auditor) and he or his firm shall be entitled to remuneration for professional services as if he were not a director;
52 (iii) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the Company or in which the Company is otherwise interested.
For the purposes of this paragraph:
(i) a general notice given to the directors that a director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the director has an interest in any such transaction of the nature and extent so specified; and
(ii) an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his;
(iii) an interest arising solely from a director being a director or other officer of, or employed by, any subsidiary undertaking of the Company is not a material interest;
(iv) adirector need not disclose an interest if it cannot be reasonably regarded as likely to give rise to a conflict of interest; and
(v) adirector need not disclose an interest if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware).
(d) Authorisation of conflicts of interest The directors have power to authorise (an “Authorisation”) any matter which would or might constitute or give rise to any breach of the duty of a director under Section 175 of the Act to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (including, without limitation, in relation to the exploitation of any property, information or opportunity, whether or not the Company could take advantage of it). Any Authorisation may be given subject to such terms and conditions as the directors determine at their absolute discretion and the directors may revoke or vary any Authorisation at any time.
(e) Directors’ power to vote Adirector shall not vote on any resolution of the directors concerning an Authorisation relating to himself or, save as otherwise provided by the Articles or as permitted by the terms of an Authorisation, concerning any other matter in which he has an interest which together with any interest of any person connected with him is to his knowledge a material interest (other than by virtue of his interests in shares or debentures or other securities of or otherwise in or through the Company), except in certain limited circumstances.
(f) Directors’ liabilities Subject to the Act or any other provision of law, a director or former director of the Company or an associated company may be indemnified (including by funding any expenditure incurred or to be incurred by him) out of the Company’s assets against:
(i) any cost, charge, loss, damage and liability incurred by him in connection with any negligence, default, breach of duty, breach of trust or otherwise in relation to the Company or an associated company;
(ii) any cost, charge, loss, damage and liability incurred by him in connection with the activities of the Company or an associated company in its capacity as a trustee of an occupational pension scheme (as defined in Section 235(6) of the Act); and
(iii) any other liability incurred by him as an officer of the Company or an associated company.
53 Every director (and every director of any associated company of the Company) shall be entitled to:
(i) have funds provided to him by the Company to meet expenditure incurred or to be incurred by him in defending himself in any proceedings (whether civil or criminal) or in connection with an application for relief (as defined in Section 205(5) of the Act) or in an investigation, or against action proposed to be taken, by a regulatory authority; or
(ii) receive assistance from the Company as will enable him to avoid incurring such expenditure, where such proceedings, application, investigation or action are in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the Company or any associated company of the Company.
Adirector will be obliged to repay any funds provided to him no later than:
(i) in the event he is convicted in such proceedings, the date when the conviction becomes final; or
(ii) in the event of judgment being given against him in such proceedings, the date when the judgment becomes final; or
(iii) in the event of the court refusing to grant him such relief, the date when the refusal becomes final; or
(iv) in the event he becomes liable for any sum payable to a regulatory authority by way of penalty in respect of non compliance with any requirement of a regulatory nature howsoever arising, the date on which any appeal relating to such sum becomes final (within the meaning of Section 205(3) of the Act).
(g) Insurance The directors may purchase and maintain insurance for any persons who are, or were at any time, directors against any liability incurred by him in respect of any act or omission in the actual or purported execution or discharge of his duties or in the exercise or purported exercise of his powers or otherwise in relation to his duties, powers or offices in relation to the Company.
5.5 Communications with members Anything sent or supplied by or to the Company under the Articles may be sent or supplied in any way in which the Act provides for documents or information to be sent or supplied by or to the Company for the purposes of the Act. The Company may send or supply documents or information to members, for the purposes of the Act or under the Articles, by making them available on a website in accordance with the Act.
6. TAKEOVER CODE 6.1 Mandatory bid The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of Ordinary Shares were to increase the aggregate holding of the acquirer and its concert parties to shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending on the circumstances, its concert parties, would be required (except with the consent of the Panel on Takeovers and Mergers) to make a cash offer for the outstanding Ordinary Shares in the Company at a price not less than the highest price paid for the Ordinary Shares by the acquirer or its concert parties during the previous 12 months.
This requirement would also be triggered by any acquisition of Ordinary Shares by a person holding (together with its concert parties) shares carrying between 30 and 50 per cent. of the voting rights in the Company if the effect of such acquisition were to increase that person’s percentage of the total voting rights of the Company.
54 6.2 Squeezeout Under the Act, if an offeror were to acquire 90 per cent. of the Ordinary Shares within four months of making its offer, it could then compulsorily acquire the remaining 10 per cent. It would do so by sending a notice to outstanding Shareholders telling them that it will compulsorily acquire their shares and then, six weeks later, it would execute a transfer of the outstanding shares in its favour and pay the consideration to the Company, which would hold the consideration on trust for outstanding Shareholders.
The consideration offered to the Shareholders whose shares are compulsorily acquired under the Act must, in general, be the same as the consideration that was available under the takeover offer unless the Shareholders can show that the offer value is unfair.
6.3 Sellout The Act also gives minority Shareholders a right to be bought out in certain circumstances by an offeror who had made a takeover offer. If a takeover offer related to all the Ordinary Shares and at any time before the end of the period within which the offer could be accepted the offeror held or had agreed to acquire not less than 90 per cent. of the Ordinary Shares, any holder of shares to which the offer relates who has not accepted the offer can by a written communication to the offeror require it to acquire those shares. The offeror would be required to give any Shareholder notice of his right to be bought out within one month of that right arising.
The offeror may impose a time limit on the rights of minority Shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a Shareholder exercises its rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.
7. DISCLOSURE OF INTERESTS 7.1 Directors’ and other interests 7.1.1 As at the date of this document and immediately following Admission, the interests of the Directors (including persons connected with the Directors within the meaning of section 252 of the Act) in the issued share capital of the Company excluding the Options (details of which are set out in paragraph 7.1.2 of this Part 4) are as follows:
At the date of Immediately following this document Admission Percentage Percentage Number of of ordinary Number of of Issued Ordinary share Ordinary Share Director Shares capital Shares Capital Rupert Lowe* 869,565 0.64% 1,369,565 0.90% Michael Moran 500,000 0.37% 3,638,937 2.38% Karol Sikora 3,750,000 2.75% 3,750,000 2.46% Paul Tuson ——1,531,012 1.00% Michael von Bertele ——500,000 0.33% * In addition, Rupert Lowe has an interest in a further 434,783 Ordinary Shares held by Data Path Office Network Services Limited, of which he is the controlling shareholder. Percentage Percentage Number of of growth Number of of Issued Growth share Growth Share Director Shares capital Shares Capital Rupert Lowe 500,000 8.72% —— Michael Moran 3,138,937 54.73% — — Paul Tuson 1,531,012 26.70%—— Michael von Bertele 500,000 8.72%——
55 7.1.2 As at the date of this document, the following Options have been granted to the Directors:
Expiry of Exercise Director Date of Grant Options Option Price (£) Michael Moran 06/03/2017 76,923 06/03/2027 £1.00 Paul Tuson 06/03/2017 76,923 06/03/2027 £1.00
7.1.3 Save as disclosed in this paragraph 7.1 none of the Directors nor any member of their families, nor any person connected with them within the meaning of section 253 of the Act, has any interest in the issued share capital of the Company or its subsidiaries, or any options over the share capital of the Company. 7.1.4 The following connected persons hold Options:
Individual Date of Grant Options Expiry of Option Exercise Price Jennifer Moran* 06/03/2017 23,747 06/03/2027 £1.00 James Moran* 06/03/2017 8,635 06/03/2027 £1.00
* Jennifer Moran and James Moran are the adult children of Michael Moran and have, as employees, received Options in line with their roles and responsbilities. 7.1.5 Save for the Introduction Agreement referred to in paragraph 11.1 of this Part 4 or the service agreements and letters of appointment referred to in paragraph 9.1 of this Part 4 or the Relationship Agreement referred to in paragraph 11.4 of this Part 4 or the lock in agreements referred to in paragraphs 11.1 and 11.5 of this Part 4 or the restricted share agreement referred to in paragraph 4.30 of this Part 4, there are no agreements, arrangements or understandings (including compensation agreements) between any of the Directors, recent Directors, Shareholders or recent Shareholders of the Company connected with or dependent upon Admission or the Introduction. 7.1.6 No Director or any member of their family holds or has held any financial product whose value in whole or in part is determined directly or indirectly by reference to the price of Ordinary Shares.
7.2 Significant Shareholders 7.2.1 In addition to those disclosed in paragraph 7.1 above, the Company is aware of the following persons who, at 22 February 2019 (being the latest practicable date before publication of this document) and following completion of Admission, have interests in voting rights over 3 per cent. or more of the issued share capital of the Company:
At the date of Immediately following this document Admission Percentage Percentage Number of of ordinary Number of of Issued Ordinary share Ordinary Share Shareholder Shares capital Shares Capital NorTrust Nominees Limited(1) (Account WIZ01) 32,250,000 23.63% 32,250,000 21.12% NorTrust Nominees Limited(2) (Account WIX01) 22,173,913 16.25% 32,673,913 20.74% Cruisen Ltd 14,500,000 10.63% 14,500,000 9.50% The Wales Life Sciences Investment Fund LP 10,000,000 7.33% 10,000,000 6.55% Global Healthcare Limited 7,000,000 5.13% 7,000,000 4.58% Smart Profit Limited 6,956,522 5.10% 6,956,522 4.56% WND Holding Ltd 6,956,522 5.10% 6,956,522 4.56% Ion Beam Applications S.A. 5,000,000 3.66% 5,000,000 3.27% Western Provident Association 5,000,000 3.66% 5,000,000 3.27% Sigma Healthcare Investments Ltd 4,347,826 3.19% 4,347,826 2.85% Formation Group PLC 4,347,826 3.19% 4,347,826 2.85%
(1) Woodford Patient Capital Trust plc (2) LF Woodford Equity Income Fund 56 7.2.2 Save as disclosed above, the Directors are not aware of any person or persons who, directly or indirectly, have an interest in the Company which represents 3 per cent. or more of its issued share capital or voting rights who, directly or indirectly, jointly or severally, exercise or could exercise control over the Company.
7.2.3 Neither the Directors nor any Significant Shareholders have different voting rights to other holders of the share capital of the Company.
8. ADDITIONAL INFORMATION ON THE DIRECTORS 8.1 The Directors currently hold (other than the Company) the following directorships and are partners in the following partnerships and have held the following directorships and have been partners in the following partnerships within the five years prior to the publication of this document:
Name Current Directorships/Partnerships Former Directorships/Partnerships Rupert Lowe Appleclaim Insurance Crookie Limited Holdings Limited Gracechurch UTG no. 368 Limited Arlowe Properties Limited Gracechurch UTG no. 369 Limited Biopharma Process Systems Limited Starstone Insurance plc Biopharma Technology Limited Starstone Underwriting Limited Cassidy Capital Limited Torus (UK) Limited Data Path Office Network WH Ireland Group plc Services Limited WH Ireland Limited Digme Fitness Limited Dripping Rock Limited Flovate Solutions Limited Flovate Workflow Technologies Limited Futebol De Salao UK Limited ICFDS Global Limited Intelligence Research Limited J.Brand Limited Lowe And Oliver Limited Lowe Holdings Limited PE487 Limited Pronyx Consulting Limited Scarabus Trading Limited Tillmouth & Tweed Salmon Fishings LLP
Michael Moran Rutherford Cancer Care Limited Proton Partners Clinical Rutherford Diagnostics Limited Operations Limited Rutherford Estates Limited Proton Partners Group Limited Rutherford Innovations Limited The British Biathlon Union Rutherford Infrastructures Limited
Karol Sikora Cancerpartners International Limited Cancer Treatment Partners Cancer Partners UK Limited International Limited Rutherford Cancer Care Limited Dorset Square Oncology Limited Rutherford Diagnostics Limited Genesis Cancer Care UK Limited Transcrip Partners LLC Mei Healthcare Limited Venomtech Limited PROTONPARTNERSUK LTD
Paul Tuson Box Business Solutions Limited Caf Holdings Limited Harwood Wealth Management Lombard Risk Compliance Policies Limited Group Plc Moguldom Limited LGG Bid Limited Proton Partners Holdings Limited Live Guru Limited Vermeg Compliance Limited Nusch.Me Telecom Limited Vermeg Management Limited Vermeg Systems Limited
57 Name Current Directorships/Partnerships Former Directorships/Partnerships Alain Baron Mirabaud & Cie SA N/A Mirabaud (Abu Dhabi) Limited Mirabaud (Middle East) Limited
Christopher Evans Arix Bioscience Holdings Limited Arix Capital Management Limited Arix Bioscience plc Arthurian Life Sciences GP Limited Arthurian Life Sciences Limited Arthurian Life Sciences SPV GP Limited Arthurian Life Sciences GP Limited AV22 Limited Arthurian Life Sciences SPV GP limited Axellis Limited AV22 Ltd Decon Sciences Limited Ellipses Pharma Limited DS Realisation 2010 Limited Excalibur Fund Managers Limited Lab 21 Limited Excalibur Group Holdings Limited Lab 21 Diagnostic Services Limited Excalibur Healthcare Services Limited Life Sciences Hub Wales Limited Excalibur Medical Ventures Limited Magstim (Holdings) Limited Fox & Shannon Limited Magstim (Holdings) 2 Limited Glebe Corporate LLP Merlin Limited Glebe Facilities Limited Merlin Asset Management Limited Global Mediscience Fund Sicav Plc Merlin General Partner III Limited Global Mediscience Master Sicav Merlin (Scotland) GP Limited Limited Mzima Medical Limited Malta Medical Sciences Limited NC Pharma LLC Merlin Scientific Consulting Limited Perspective Bioscience Investments Limited Merlin Scientific LLP Perspective No 2 Limited QB Fitness Limited Qbrand21 Holdings Limited QB Rentals Limited Simbec Research Limited Q21 PJ Limited Vivomedica PLC Reneuron Group plc Vivomedica (UK) Limited Simbec Orion Group Limited Sultan Scientific Limited The Cancer Awareness Trust
Michael von Bertele Aspen Medical UK Limited The RAMC Charity Grenadenberg Consulting Limited Toe in the Water (Charity) Rutherford Diagnostics Limited Rutherford Estates Limited Rutherford Infrastructures Limited Rutherford Innovations Limited Salisbury NHS FT Trayned Insight Limited
8.2 Save as set out below in this document, no Director has:
8.2.1 any unspent convictions in relation to indictable offences (including fraudulent offences);
8.2.2 ever had any bankruptcy order made against him or entered into any individual voluntary arrangements with his creditors;
8.2.3 ever been a director of a company which has been placed in receivership, creditors’ voluntary liquidation, compulsory liquidation or administration, or been subject to a voluntary arrangement or any composition or arrangement with its creditors generally or any class of its creditors, whilst he was a director of that company or within the 12 months after he ceased to be a director of that company;
8.2.4 ever been a partner in any partnership which has been placed in compulsory liquidation or administration or been the subject of a partnership voluntary arrangement whilst he was a partner in that partnership or within the 12 months after he ceased to be a partner in that partnership;
8.2.5 owned, or been a partner in a partnership which owned, any asset which, while he owned that asset, or while he was a partner or within 12 months after his ceasing to be a partner in the partnership which owned that asset, entered into receivership;
58 8.2.6 received any official public incrimination and/or sanction by any statutory or regulatory authority (including recognised professional bodies); or
8.2.7 been disqualified by a court from acting as a director of any company or from acting in the management or conduct of the affairs of a company.
8.3 The following disclosures are made pursuant to paragraph 21 of Appendix 1 to the NEX Exchange Rules.
8.3.1 Sir Chris Evans was a director of Decon Sciences Limited which went into administration on 12 July 2010 and subsequently creditors voluntary liquidation on 6 July 2011.
8.3.2 Axellis Limited, DS Realisation 2010 Limited, Vivomedica PLC and Vivomedica (UK) Limited were all subject to voluntary liquidations during the directorship of Sir Chris Evans following the sale of each of their businesses as a whole and distribution of their assets to shareholders.
8.3.3 Rupert Lowe resigned as a director of Southampton Leisure Holdings plc on 1 April 2009. That company went into in administration on 2 April 2009 and was subsequently placed into creditors voluntary liquidation on 25 February 2010.
8.3.4 Rupert Lowe was a director of Hills Building Services Limited which was placed into creditors voluntary liquidation on 9 November 2012.
8.3.5 Mike Moran was adjudged bankrupt on 20 May 2010, while working overseas, on account of a personal guarantee given in respect of a lease. The amount owed, being less than £100,000, was repaid in full and Mike Moran was discharged from bankruptcy on 21 May 2011.
8.3.6 Paul Tuson was a director of Youmeo.com Limited which was placed into creditors voluntary liquidation on 18 June 2009.
9. DIRECTORS’ SERVICE AGREEMENTS AND TERMS OF APPOINTMENT 9.1 Summary details of the service agreements and letters of appointment entered into between the Company and the Directors are set out below:
9.1.1 Pursuant to an agreement with the Company dated 4 April 2018, Rupert Lowe has been appointed as a non executive chairman of the Company. The appointment is for an initial term of three years that commenced on 27 February 2018 (any term renewal is subject to Board review and re election at the next annual general meeting) but is terminable earlier on notice by either side giving 3 months’ notice at any time. The fee payable to Mr Lowe will be £75,000 per annum. Mr Lowe is entitled to participate in the Health Insurance scheme operated by the Company subject to the rules of such scheme.
9.1.2 Pursuant to a service agreement with the Company dated 16 March 2015, Michael Moran is employed by the Company as chief executive officer. Mr Moran’s salary is £180,000 per annum. Mr Moran is entitled to participate, at the sole discretion of the Company, in any benefit scheme operated by the Company, subject to the rules of such scheme.
Mr Moran’s employment commencement date for the purposes of his continuous employment is 1 January 2015. In addition to the usual conduct related termination rights, the service agreement entitles Mr Moran or the Company to terminate his employment on 12 months’ notice.
Mr Moran’s service agreement contains undertakings and prohibitions (which apply for a period of 6 12 months following termination of employment) on competing, soliciting and dealing with customers and prospective customers and poaching employees.
9.1.3 Pursuant to a service agreement with the Company dated 4 June 2015, Paul Tuson is employed by the Company as chief financial officer. Mr Tuson’s salary is £140,000 per annum and he receives a car allowance of £500 per month. Mr Tuson is entitled to participate, at the sole discretion of the Company, in any benefit scheme operated by the Company, subject to the rules of such scheme.
59 Mr Tuson’s employment commencement date for the purposes of his continuous employment is 1 June 2015. In addition to the usual conduct related termination rights, the service agreement entitles Mr Tuson or the Company to terminate his employment on 12 months’ notice.
Mr Tuson’s service agreement contains undertakings and prohibitions (which apply for a period of 6 12 months following termination of employment) on competing, soliciting and dealing with customers and prospective customers and poaching employees.
9.1.4 Pursuant to a service agreement with the Company dated 20 November 2017, Karol Sikora is employed by the Company as chief medical officer for which he is required to work three days a week. Mr Sikora’s salary is £100,000 per annum. Mr Sikora is entitled to participate, at the sole discretion of the Company, in any benefit scheme operated by the Company, subject to the rules of such scheme. In addition, Mr Sikora is also entitled to participate in the Company’s performance related bonus scheme subject to such conditions as the Board may in its absolute discretion determine from time to time.
Mr Sikora’s employment commencement date for the purposes of his continuous employment is 1 January 2015. In addition to the usual conduct related termination rights, the service agreement entitles Mr Sikora or the Company to terminate his employment on three months’ notice.
Mr Sikora’s service agreement contains undertakings and prohibitions (which apply for a period of 6 12 months following termination of employment) on competing, soliciting and dealing with customers and prospective customers and poaching employees.
9.1.5 Alain Baron has been appointed as a non executive director of the Company. The appointment is for an initial term of three years but is terminable earlier by either side giving three months’ notice at any time. The fee payable to Mr Baron will be £30,000 per annum
9.1.6 Pursuant to a non executive director agreement with the Company dated 8 July 2015, Christopher Evans has been appointed as a non executive director of the Company. The appointment is for an initial term of four years and is subject to re election by the shareholders of the Company, provisions relating to the retirement of directors in the Company’s Articles and any relevant statutory provisions relating to removal of a director. It is terminable earlier by either side giving three months’ notice at any time. The fee payable to Mr Evans will be £30,000 per annum.
9.1.7 Pursuant to a letter of appointment with the Company dated 16 March 2015, Michael von Bertele has been appointed as a non executive director of the Company. The appointment is subject to re election by the shareholders of the Company, provisions relating to the retirement of directors in the Company’s Articles and any relevant statutory provisions relating to removal of a director. The appointment is terminable earlier by either side giving three months’ notice at any time. The fee payable to Dr von Bertele will be £55,000 per annum.
9.1.8 Total remuneration paid to directors, including pension contributions amounted to £727,000 during the year ended 28 February 2018.
9.2 Save as set out above there are no contracts providing for benefits upon termination of employment of any Director.
10. INTRODUCTION AGREEMENT Under the terms of the Introduction Agreement to be entered into on or prior to Admission, Grant Thornton has agreed to act as NEX Exchange Corporate Adviser to the Company for the purposes of Admission. The Company and the Directors have given certain customary warranties as to the Group and its operations and the Company has given an indemnity to Grant Thornton. Further details of the Introduction Agreement are set out in paragraph 11.1 of this Part 4.
60 11. MATERIAL CONTRACTS The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Group within the two years immediately preceding the date of this document and are, or may be, material to the Group or have been entered into by any member of the Group and contain any provision under which any member of the Group has any obligation or entitlement which is material to the Group at the date of this document:
11.1 Introduction Agreement The Company, each of the Directors and Grant Thornton have entered into the Introduction Agreement dated 25 February 2019 pursuant to which, subject to certain conditions, Grant Thornton has agreed to assist the Company in connection with its application for Admission. The Introduction Agreement contains customary indemnities and warranties from the Company and warranties from the Directors in favour of Grant Thornton together with provisions which enable Grant Thornton to terminate the Introduction Agreement in certain circumstances, including circumstances where any of the warranties are found to be untrue or inaccurate in any material respect. The Company has agreed to pay to Grant Thornton a corporate finance fee in connection with its services under the Agreement relating to Admission.
Pursuant to the lock in and orderly market provisions contained in the Introduction Agreement, each of the Directors has agreed to not dispose of any of their Ordinary Shares, save in certain circumstances, for a period of 12 months following Admission. In addition, for a period of 12 months after the first anniversary of Admission, they shall each notify the Company and Grant Thornton (for so long as it is the Company’s NEX Exchange Corporate Adviser) of any intention to deal or otherwise dispose of any Ordinary Shares.
11.2 NEX Exchange Corporate Adviser Engagement Letter The Company and Grant Thornton have entered into an agreement dated 14 February 2019 pursuant to which Grant Thornton has agreed to act as corporate adviser to the Company following Admission as required by the NEX Rules. Grant Thornton shall provide, inter alia, such independent advice and guidance to the Directors of the Company and the Company as they may require from time to time, as to the nature of their responsibilities and obligations to ensure compliance by the Company on a continuing basis with the NEX Rules. The agreement contains an indemnity given by the Company to Grant Thornton in relation to the provision by Grant Thornton of its services.
11.3 NEX Exchange Corporate Adviser Agrement Grant Thornton has been engaged by the Company to act as NEX Exchange Corporate Adviser on an on going basis by way of an agreement dated 25 February 2019 between (1) the Company (2) the Directors and (3) Grant Thornton pursuant to which the Company has appointed Grant Thornton to act as NEX Exchange Corporate Adviser to the Company for the purposes of the NEX Exchange Rules for an initial term of twenty four months. The Company has agreed to pay Grant Thornton an annual retainer. It has also been agreed that the retainer fee will be reviewed and agreed between the Company and Grant Thornton annually. The agreement contains certain undertakings and indemnities given by the Company to Grant Thornton and certain undertakings given by the Directors to Grant Thornton. Following the initial term, the agreement is terminable upon not less than 30 days’ prior written notice by either the Company or Grant Thornton.
11.4 Relationship Agreement Woodford Funds have entered into a relationship deed with the Company and Grant Thornton dated 25 February 2019 under which, conditional upon Admission, Woodford Funds have agreed, for so long as they and their associates hold an interest in 20 per cent. or more of the voting rights attaching to the issued Ordinary Shares, to exercise their voting rights in so far as they reasonably can to ensure certain matters. These matters include ensuring that the Group is capable at all times of carrying on its business independently of it, that all transactions entered into between any member of the Group and them will be made at arm’s length and on a normal commercial basis, that a majority of the members of the Board are independent of them, and that they shall not vote on any resolution to cancel the Company’s admission to trading on NEX, save in connection with an offer for whole the Company made by a person other than them or an associate of them.
61 11.5 NonDirector Lockin Agreements The Woodford Funds and the Wales Life Sciences Investment Fund, who on Admission will hold in aggregate 76,043,478 Ordinary Shares (representing 49.80 per cent. of the Issued Share Capital) have entered into lock in agreements dated 25 February 2019 pursuant to which they have agreed with the Company, subject to certain limited exceptionsnot to dispose of any Ordinary Shares owned by them at Admission, or any Ordinary Shares which may be issued pursuant to any option in respect of Ordinary Shares held at the date of Admission, for a period of six months from Admission.
The Company intends to enter into further lock in agreements with other significant Shareholders on similiar terms to the Woodford Funds prior to Admission.
11.6 Woodford Commitment Agreement Pursuant to the terms of a Commitment Agreement entered into on 25 February 2019, Woodford Investment Management Limited (“Woodford”), acting as agent for and on behalf of LF Woodford Equity Income Fund (“WEIF”) and Omnis Income and Growth Fund (“OIG” and together with WEIF the “Investor”) has undertaken to subscribe:
(i) for 10,000,000 new ordinary shares at a price of £2 per shares effective upon Admission (of which 9,000,000 will be issued to a nominee on behalf of WEIF and 1,000,000 will be issued to a nominee on behalf of OIG (“Woodford Admission Shares”); and
(ii) upon the request of the Company at any time after Admission for ordinary shares in the Company (“Woodford Subscription Shares”) up to a value of £80 million all of which is expected to be issued to a nominee on behalf of WEIF and none to a nominee on behalf of OIG (although Woodford retains the right to vary these proportions or to allocate the Ordinary Shares to another fund managed by Woodford) (the “Commitment”). The Commitment will last for a period of 18 months from the date of Admission (“Commitment Period”).
The price at which the Woodford Subscription Shares will be subscribed is £1.76 or, if the volume weighted average price on the NEX Exchange Growth Market of ordinary shares in the Company for the 30 trading days prior to the date of an allotment (“Average Market Price”) at the time of service of a subscription request is less than £2 the higher of (a) the Average Market Price multiplied by 0.88, or (b) £1.
In consideration for Woodford entering into the Commitment the Company has agreed:
i. to pay Woodford an Arrangement Fee in the amount of 1 per cent. of the aggregate value of the Woodford Commitment to be satisfied by the issue of 500,000 ordinary shares to the Investor on Admission.
ii. to grant Woodford a right to appoint a nominee director, or, to the extent they do not appoint a nominee director, a board observer.
iii. to appoint Ondra LLP, or another independent professional advisory firm to be agreed with Woodford to support the execution of the current business plan. The independent advisory firm will remain appointed by the Company during the Commitment Period
iv. to use the funds only for the purposes of the agreed business plan.
Other Conditions
a. each Investor’s Commitment will be reduced or limited if and to the extent that, in the opinion of the Investor (acting reasonably), the Commitment shall in whole or in part result in:
the relevant Investors (or the Investors together) and/or Woodford triggering a rule 9 mandatory cash offer requirement under the Takeover Code (“Rule 9 Limit”) provided that this does not apply where the Panel on Takeovers and Mergers (“Panel”) has given a waiver of rule 9 applicable to the Subscription Request (“Waiver”) .In the event the Panel shall not have given a Waiver applicable to a Subscription Request, the parties undertake to use all reasonable endeavours to obtain such a Waiver.
62 b. the aggregate amount of the Commitment reduces proportionately (that is,.on a £ by £ basis) if the Company subsequently raises other capital through, inter alia, the issue of new securities (including any such securities that are issued to Woodford), or on certain other specified events which result in an increase in the cash or facilities available to the Company (such as an increased loan facility or revenue generated from sale of assets).
c. Woodford has the right to procure that any actual subscription is made by any third party or any of its other discretionary managed fund clients.
11.7 Shawbrook Loan Facility The Company entered into a stage payment and loan agreement dated 31 December 2015, as amended and restated on 29 November 2017 and as further amended by consent and waiver letters dated 29 February 2018, 20 December 2018, 20 December 2018, 20 December 2018 and 20 December 2018 between, amongst others, Shawbrook Bank Limited voting“Shawbrook”) as lender and the Company as borrower for a secured stage payment and loan facility of up to £22,000,000. Currently approximately £20.5m of the facility is drawn down. The loan facility is secured on various assets of the Group and is guaranteed by certain of the Group’s subsidiaries. Interest on the drawn down amount is 7.75 per cent. per annum. The Company and Shawbrook have agreed that the Company is technically in breach of certain provisions of the Shawbrook facility. The Company has requested a waiver of such breaches and Shawbrook has indicated to the Company that they will grant such waiver.
11.8 WPA Loan Facility The Company entered into a debt facility dated 27 February 2017 with Western Provident Association (“WPA”) as lender and the Company as borrower for an £5,000,000 term loan facility. The loan facility is unsecured and not guaranteed. Interest on the drawn down amount is at 5.00 per cent. per annum. The Company and WPA have agreed that the Company is technically in breach of certain provisions of the WPA facility. The Company has requested a waiver of such breaches and WPA has indicated to the Company that they will grant such waiver or replace the facility.
12. SHARE SCHEMES
CSOP All Options granted and outstanding under the CSOP will become exercisable with effect from Admission. Options granted in the future will normally be exercisable following the third anniversary of grant, provided the performance conditions, if any, imposed at grant have been satisfied.
12.1 CSOP The CSOP comprises two independent parts: part A of the CSOP satisfies the requirements for tax relief under Schedule 4 ITEPA and part B does not.
The following is a summary of the rules of part A of the CSOP:
(a) Eligibility All employees and full time directors of the Group are eligible to participate at the discretion of the Board.
(b) Grant of Options Options may be granted by the Board at any time. No consideration is payable for the grant of an Option. Options granted under the CSOP are personal to a participant and, except on his death, may not be transferred, assigned or charged. When granting Options the Board may specify objective performance targets to be satisfied before those Options can be exercised.
(c) Exercise price The price at which participants in the CSOP may acquire Ordinary Shares shall not be less than the greater of the nominal value of an Ordinary Share and its market value on the date of grant. The market value is set in accordance with the basis agreed with HMRC Shares and Assets Valuation.
63 (d) Individual limits No Option may be granted to a participant which would result in the aggregate exercise price of Ordinary Shares comprised in Options (which remain unexercised, and have not lapsed or been cancelled or surrendered) granted to him under the CSOP and any other equivalent Schedule 4 company share option plan of the Company or any associated company exceeding £30,000.
(e) Exercise, lapse and exchange of Options Options may normally be exercised in whole or in part following the first exercise date specified on grant of the Option and before the tenth anniversaries of their grant provided any performance targets specified at the date of grant have been achieved. Historically Options have been granted on the basis that they will become exercisable on Admission. In the future, it is intended that Options will be granted on the basis that they are exercisable following the third anniversary of grant, provided any performance conditions imposed at grant have been satisfied. Options may be satisfied by the issue of Ordinary Shares or the transfer of existing Ordinary Shares. Options will normally lapse on cessation of employment. However, exercise is permitted for a limited period following cessation of employment for specified reasons such as death, injury, ill health, disability, retirement, redundancy, transfer of an employer or business out of the Group and, in other circumstances, at the discretion of the Board.
In the event of a takeover or liquidation of the Company, Options may be exercised within certain time limits. There are also provisions for the exchange of Options in specified circumstances.
(f) Limits on the issue of shares The maximum number of Ordinary Shares in respect of which Options may be granted under the CSOP may be determined by the Board from time to time. The Board intends to limit the number of Ordinary Shares under the CSOP to 10 per cent. of the issued share capital of the Company from time to time. Options granted prior to Admission and Options or other rights to acquire Ordinary Shares which lapse or have been released do not count towards this limit.
(g) Adjustments The number of shares comprised in an Option and/or exercise price may be adjusted if any capitalisation issue (other than scrip dividend), rights issue, consolidation, sub division or reduction of capital if the Board considers appropriate.
(h) Rights attaching to shares All Ordinary Shares allotted under the CSOP will rank pari passu with all other Ordinary Shares for the time being in issue, save as regards any rights arising by reference to a record date prior to the date of allotment. Application will be made for permission for any such Ordinary Shares to be admitted to trading on NEX.
(i) Amendments The Board may at any time amend the CSOP provided that changes may not be made to Part A of the Plan if as a result the CSOP would no longer satisfy the requirements for tax relief under Schedule 4 ITEPA and provided that the prior approval of the Company in general meeting is obtained for, inter alia, amendments to the material advantage of participants, amending the eligibility criteria, and the variation or adjustment of Options. However, such prior approval will not be required in relation to any minor amendment or an amendment which is made to comply with the provisions of any existing or proposed legislation or to obtain or maintain favourable taxation treatment of any participating company or any participant.
(j) Income tax and national insurance The participant indemnifies the Company for any income tax liability and primary Class 1 (employee) national insurance liability which arises on the grant or exercise of an Option. The Board has the ability to require participants to cover any secondary Class 1 (employer) national insurance contributions which will arise for the Company on gains made on the exercise of Options, but it has discretion to waive their requirement.
64 (k) Part B The provisions of part B of the CSOP conform substantially to those of part A except:
(i) office holders, contractors and consultants are eligible to receive Options under part B.
(ii) the market value of Ordinary Shares is not agreed with HMRC Shares and Assets Valuation, and
(iii) there is no £30,000 limit.
13. LITIGATION There are no governmental, legal or arbitration proceedings active, pending or threatened against, or being brought by, any member of the Group which are having, or may have or have had during the 12 months preceding the date of this document a significant effect on the Groups’ financial position or profitability.
The Company has received a letter from one its Shareholders making certain complaints regarding the Company’s dealings with such Shareholder. The Company has sought to respond to such complaints to the Shareholder’s satisfaction and will continue to do so but there can be no certainty that it will be successful. No proceedings have been commenced but, if they are, the Company intends to defend any such action. The Company further believes that even if such claims had any merit (which it denies) no loss would have been suffered by such Shareholder and that any such action or proceedings would not have a significant adverse effect on the financial position of the Company.
14. RELATED PARTY TRANSACTIONS Save as set out in this document and the financial information appended thereto, as far as the Directors are aware there have been and are currently no agreements or other arrangements between the Company and individuals or entities that may be deemed to be related parties, for the period of five years prior to the date of this document.
15. WORKING CAPITAL The Directors are of the opinion that, having made due and careful enquiry, the working capital available to the Company and the Group, taking into account the Woodford Commitment and the Group’s available debt facilities, will be sufficient for its present requirements, that is for at least 12 months from the date of Admission.
16. UNITED KINGDOM TAXATION 16.1 General The following summary is intended as a general guide only for UK tax resident Shareholders as to their tax position under current UK tax legislation and HMRC practice as at the date of this document. Such law and practice (including, without limitation, rates of tax) is in principle subject to change at any time, and possibly with retrospective effect.
Neither the Company nor its advisers warrant in any way the tax position outlined above which, in any event, is subject to changes in the relevant legislation and its interpretation and application.
Any person who is in any doubt as to his tax position or who may be subject to tax in any other jurisdiction should consult his professional adviser.
The Company is at the date of this document resident for tax purposes in the United Kingdom and the following is based on that status. The Company is automatically subject to UK corporation tax on its worldwide income and gains unless another territory makes a claim under a relevant double taxation arrangement. The UK corporation tax rate is currently 19 per cent. (reducing to 17 per cent. from April 2020).
This summary is not a complete and exhaustive analysis of all the potential UK tax consequences for holders of Ordinary Shares. It addresses certain limited aspects of the UK taxation position applicable to Shareholders resident and domiciled for tax purposes in (and only in) the UK (except in so far as express reference is made to the treatment of non UK residents) and who are absolute beneficial
65 owners of their Ordinary Shares and who hold their Ordinary Shares as an investment. This summary does not address the position of certain classes of Shareholders who (together with associates) have a 10 per cent. or greater interest in the Company, or, such as dealers in securities, market makers, brokers, intermediaries, collective investment schemes, pension funds, charities or UK insurance companies or whose shares are held under a self invested personal pension or an individual savings account or are “employment related securities” as defined in section 421B of ITEPA.
16.2 Taxation of dividends Company Under current UK taxation legislation, no UK withholding tax will be deducted at source from dividends paid by the Company, including cases where dividends are paid to a Shareholder who is not resident (for tax purposes) in the UK.
Individual Shareholders With effect from 6 April 2018, Shareholders who are individuals are entitled to a tax free dividend allowance of £2,000 per tax year on the amount of any cash dividends received. If an individual receives dividends in excess of this allowance in a tax year, the excess will be taxed at 7.5 per cent. (for individuals not liable to tax at a rate above the basic rate), 32.5 per cent. (for individuals subject to the higher rate of income tax) and 38.1 per cent. (for individuals subject to the additional rate of income tax).
Trustees and other Shareholders UK resident trustees of discretionary trusts receiving dividends from shares are liable to account for income tax at the dividend trust rate, currently 38.1 per cent., subject to any reliefs. Trustees do not qualify for the £2,000 dividend allowance available to individuals. Trustees of non resident discretionary trusts receiving dividends from shares may also be liable to income tax in certain circumstances.
Interest in possession trusts could be liable to account for income tax at a rate of 7.5 per cent. on dividends received from the Company.
This is a complex area and trustees of such trusts should consult their own tax advisers.
Corporate Shareholders A corporate Shareholder resident in the UK for tax purposes will be subject to UK corporation tax on dividend payments received from the Company unless the dividend falls within one of the exempt classes set out in Part 9A of the Corporation Tax Act 2009. It is anticipated that dividends should fall within one of such exempt classes, subject to anti avoidance rules and provided all conditions are met.
If the conditions for exemption are not met, or the Shareholder elects for an otherwise exempt dividend to be taxable, the Shareholder will be subject to UK corporation tax on dividend payments received from the Company at the corporation tax rates stated above.
Shareholders who are not resident in the UK for tax purposes In general, Shareholders who are not resident in the UK for UK tax purposes will not be subject to UK tax on dividends received from the Company unless they are carrying on a trade, profession or vocation in the UK thorough a branch or agency (or, in the case of a corporate shareholder, a permanent establishment, in connection with which the shares are used, held or acquired). The right of a Shareholder who is not resident (for tax purposes) in the UK to claim relief in respect of a dividend received from the Company will depend upon the existence and the terms of an applicable double taxation treaty between the country in which the Shareholders is resident and the UK. Shareholders may also be liable to tax on the dividend income under the tax law of their jurisdiction of residence.
Non UK resident Shareholders (or Shareholders who are not solely resident in the UK for tax purposes) should consult their own tax advisers in respect of the application of such provisions, their liabilities in the UK or any other jurisdiction on dividend payments from the Company and/or what relief or credit may be claimed in the jurisdiction in which they are relevant.
66 16.3 Taxation of chargeable gains For the purpose of UK tax on chargeable gains, the acquisition of Ordinary Shares pursuant to the Introduction will be regarded as an acquisition of a new holding in the share capital of the Company. The Ordinary Shares so allotted will, for the purpose of tax on chargeable gains, be treated as acquired on the date of allotment. The amount paid for the Ordinary Shares will usually constitute the base cost of a shareholder’s holding.
Individual Shareholders UK tax resident Shareholders who are individuals (or otherwise not within the charge to corporation tax) who transfer or dispose of all or some of his or her Ordinary Shares (including a disposal on a winding up of the Company) may be subject to UK tax on chargeable gains, depending on their circumstances. The Shareholder’s annual exemption (currently £11,700 for 2018/19 for individuals) and most capital losses they have may reduce the chargeable gain. UK resident individuals are generally subject to capital gains tax at a current flat rate of 20 per cent., reduced to 10 per cent. on such gains which fall within an individual’s unused basic rate income tax band, subject to any available reliefs. Trustees and personal representatives are generally subject to capital gains tax at 20 per cent., subject to certain reliefs and exemptions. Individual investors may be able to qualify for a reduced rate of 10 per cent. capital gains tax if they meet the requirements of either Entrepreneurs’ Relief or Investors’ Relief.
A Shareholder who is not resident in the UK for tax purposes, but who carries on a trade, profession or vocation in the UK through a permanent establishment (where the Shareholder is a company) or through a branch or agency (where the Shareholder is not a company) and has used, held or acquired the Ordinary Shares for the purposes of such trade, profession or vocation or such permanent establishment, branch or agency (as appropriate) will be subject to UK tax on gains arising on the disposal of Ordinary Shares.
In addition, any holders of Ordinary Shares who are individuals and who dispose of shares while they are temporarily non resident may be treated as disposing of them in the tax year in which they again become resident in the UK (subject to any available reliefs or exemptions).
Corporate Shareholders For disposals by corporate Shareholders within the charge to UK corporation tax, capital gains arising on the disposal of Ordinary Shares are chargeable to corporation tax, currently at the rate of 19 per cent., subject to the availability of an exemption (e.g. the substantial shareholding exemption) or relief. Indexation allowance may apply to reduce any such gain, although indexation cannot create or increase a capital loss (indexation is no longer available to individuals and trustees).
16.4 Stamp duty and stamp duty reserve tax The comments below are intended as a guide to the general UK stamp duty and UK stamp duty reserve tax (“SDRT”) position and do not relate to certain persons, such as market makers, brokers, intermediaries and persons connected with depositary arrangements or clearance services to whom special rules apply.
Neither UK stamp duty nor SDRT should arise on subsequent transfers of Ordinary Shares on NEX (including instruments transferring Ordinary Shares and agreements to transfer Ordinary Shares) based on the following assumptions:
(a) the Ordinary Shares are admitted to trading on NEX, but are not listed on any market (with the term “listed” being construed in accordance with section 99A of the Finance Act 1986); and
(b) NEX continues to be accepted as a “recognised growth market” (as construed in accordance with section 99A of the Finance Act 1986).
In the event that either of the above assumptions does not apply, stamp duty or SDRT may apply to transfers of Ordinary Shares in certain circumstances, currently at the rate of 0.5 per cent. of the amount or value of the consideration (rounded up in the case of stamp duty to the nearest £5), except in respect of shares held in a clearance service or in a depository receipt arrangement (for these purposes that does not include CREST) in which case other provisions may apply.
67 16.5 Inheritance Tax Trustee shareholders and individual shareholders may be liable on occasions to Inheritance Tax (“IHT”) on the value of any Ordinary Shares held by them. Under current law, the primary occasions on which IHT is charged are on the death of the Shareholder, on any gifts made during the seven years prior to the death of the Shareholder (which will also be brought into account when calculating the IHT on the death of the Shareholder), and on certain lifetime transfers, including transfers to trusts or appointments out of trusts to beneficiaries, save in very limited and exceptional circumstances.
However, a relief from IHT known as business property relief (“BPR”) may apply to ordinary shares in trading companies once these have been held for two years by the Shareholder. This relief may apply notwithstanding that a company’s shares will be admitted to trading on NEX (although it does not apply to companies whose shares are listed on the Official List of the UK Listing Authority). BPR operates by reducing the value of shares by 100 per cent. for IHT purposes which means that there will be no IHT to pay. This relief can be subject to certain restrictions.
Shareholders should consult an appropriate professional adviser if they intend to make a gift of any kind or intend to hold any Ordinary Shares through trust arrangements. They should also seek professional advice in a situation where there is a potential for a double charge to UK IHT and an equivalent tax in another country.
17. CREST 17.1 CREST is a paperless settlement system enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by written instrument in accordance with the CREST Regulations.
17.2 The Ordinary Shares will be eligible for CREST settlement. Accordingly, following Admission, settlement of transactions in the Ordinary Shares may take place within the CREST system if a Shareholder so wishes. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates are able to do so.
17.3 For more information concerning CREST, Shareholders should contact their brokers or Euroclear UK & Ireland Limited at 33 Cannon Street, London EC4M 5SB or by telephone on +44 (0) 20 7849 0000.
18. NOTIFICATIONS OF SHAREHOLDINGS The provisions of chapter 5 of the DTR (“DTR 5”) will apply to the Company and its Shareholders following Admission. DTR 5 sets out the notification requirements for shareholders and the company where the voting rights of a shareholder exceed reach or fall below the threshold of 3 per cent. and each 1 per cent. thereafter up to 100 per cent. DTR 5 provides that disclosure by a shareholder to the company must be made within two trading days of the event giving rise to the notification requirement and the company must release details to a regulatory information service as soon as possible following receipt of a notification.
19. GENERAL 19.1 Save as disclosed in this document, there has been no significant change in the financial or trading position of the Group since 31 January 2019, the date to which the last consolidated interim financial information for the Group has been prepared.
19.2 The financial information set out in Part 3 of this document relating to the Group does not constitute statutory accounts within the meaning of section 434 of the Act. PricewaterhouseCoopers LLP, chartered accountants of the Company have been the auditors of the Group for the three financial years ended 28 February 2018 and have given unqualified audit reports on the statutory accounts of the Group for those financial years within the meaning of section 495 of the Act. None of those reports contained any statements under sub section 498(2) or (3) of the Act. Statutory accounts of each member of the Group for each of the three financial years ended 28 February 2018 have been delivered to the registrar of Companies in England and Wales pursuant to section 441 of the Act.
19.3 Grant Thornton has given and not withdrawn its consent to the inclusion in this document of the references to its name in the form and context in which they are included.
68 19.4 Total costs and expenses payable by the Company in connection with the Admission (including professional fees, commissions, the costs of printing and the fees payable to the registrars) are estimated to amount to approximately £610,000 (excluding VAT).
19.5 Save as set out in this document no person (other than a professional adviser referred to in this document or trade supplier) has:
19.5.1 (i) received directly or indirectly, from the Company within the 12 months preceding the Company’s application for Admission; or (ii) entered into contractual arrangements (not otherwise disclosed in this document) to receive directly or indirectly, from the Company on or after Admission any of the following:
19.5.2 (a) fees totalling £10,000 or more;
(b) securities in the Company with a value of £10,000 or more calculated by reference to the issue price; or
(c) any other benefit with a value of £10,000 or more at the date of Admission.
19.6 Save as disclosed in this document, the Directors are not aware of any patents or intellectual property rights, licences or industrial, commercial or financial contracts or new technological processes which may be of material importance to the Company’s business or profitability.
19.7 Save as disclosed in this document, since the period of the interim financial information set out in Part 3 of this document, the Company has made no investments and there are no investments in progress which are or may be significant.
19.8 The Company’s accounting reference date is 28 February.
19.9 Save as disclosed in this document, the Company is not aware of any arrangements which may at a subsequent date result in a change of control of the Company.
19.10 Save as disclosed in this document, there are no provisions in the Articles which would have the effect of delaying, deferring or preventing a change of control of the Company.
19.11 Save as disclosed in this document, no public takeover bids have been made by third parties in respect of the Company’s issued share capital since its incorporation up to the date of this document.
19.12 Save as disclosed in this document, there are no mandatory takeover bids and/or squeeze out and sell out rules in relation to the Ordinary Shares.
19.13 Save as disclosed in this document, there are not, either in respect of the Company or its subsidiaries, any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s prospects for at least the current financial year.
19.14 Save as set out in this document, as far as the Directors are aware, there are no environmental issues that may affect the Company’s utilisation of its tangible fixed assets.
19.15 Save as disclosed in this document, the Directors are unaware of any exceptional factors which have influenced the Company’s recent activities.
19.16 The Directors are not aware of any other information that they should reasonably consider as necessary for the investors to form a full understanding of (i) the assets and liabilities, financial position, profits and losses, and prospects of the Company and the securities for which Admission is being sought; (ii) the rights attached to those securities; and (iii) any other matter contained herein.
19.17 Where information has been sourced from a third party, the information has been accurately reproduced and as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.
19.18 The Directors accept responsibility for the financial information contained in Part 3 of this document which has been prepared in accordance with the law applicable to the Company.
69 20. AVAILABILITY OF ADMISSION DOCUMENT A copy of this document is available free of charge from the registered office of the Company, and at the offices of Grant Thornton at 30 Finsbury Square, London EC1A 1AG, during normal business hours on any weekday (public holidays excepted) from the date of this document until at least one month after the date of Admission.
A copy of this document is also available on the Company’s website, www.proton int.com
Dated: 25 February 2019
70 APPENDICES
AUDITED CONSOLIDATED FINANCIAL INFORMATION FOR THE GROUP FOR: THE YEAR ENDED 28 FEBRUARY 2018
A-1 A-2 A-3 A-4 A-5 A-6 A-7 A-8 A-9 A-10 A-11 A-12 A-13 A-14 A-15 A-16 A-17 A-18 A-19 A-20 A-21 A-22 A-23 A-24 A-25 A-26 A-27 A-28 A-29 A-30 A-31 A-32 A-33 A-34 A-35 A-36 A-37 A-38 A-39 A-40 A-41 AUDITED CONSOLIDATED FINANCIAL INFORMATION FOR THE GROUP FOR: THE YEAR ENDED 28 FEBRUARY 2017
A-42 A-43 A-44 A-45 A-46 A-47 A-48 A-49 A-50 A-51 A-52 A-53 A-54 A-55 A-56 A-57 A-58 A-59 A-60 A-61 A-62 A-63 A-64 A-65 A-66 A-67 A-68 A-69 AUDITED CONSOLIDATED FINANCIAL INFORMATION FOR THE GROUP FOR: THE 13 MONTHS ENDED 29 FEBRUARY 2016
A-70 A-71 A-72 A-73 A-74 A-75 A-76 A-77 A-78 A-79 A-80 A-81 A-82 A-83 A-84 A-85 A-86 A-87 A-88 A-89 A-90 A-91 A-92 A-93 Printed by Rubicon Corporate Print 13770-01