providing life improving pharmaceuticals and ......providing life improving pharmaceuticals and...

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CONSORT MEDICAL PLC

ANNUAL REPORT & ACCOUNTSfor the year ended 30 April 2018

AN

NUA

L REPORT & A

CC

OUN

TS for the year ended

30 April 2018

CO

NSO

RT MEDIC

AL PLC

PROVIDING LIFE IMPROVING PHARMACEUTICALS AND

INNOVATIVE DELIVERY DEVICES


consortmedical.com Stock Code: CSRT

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consortmedical.comTo view our online Annual Report and Accounts 2018 visit: ar18.consortmedical.com

OVERVIEW

Consort Medical plc is a leading one-stop developer and manufacturer of drugs and premium drug delivery devices.

We partner with pharmaceutical businesses in providing innovative life improving treatments to patients across the world through two integrated activities:The design, development and manufacture of high performance medical devices for inhaled, injectable, nasal and ocular drug delivery, as well as point of care diagnostics products.

The development, formulation and manufacture of active pharmaceutical ingredients (APIs) and finished dose drugs to the highest quality standards.

We employ over 2,000 people globally and are committed to investing in patient, clinician and customer driven innovation to create new treatments.

Consort Medical is a public company quoted on the premium list of the London Stock Exchange (LSE: CSRT) and is organised in two divisions: Bespak and Aesica.

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CONSORT MEDICAL PLC Annual Report and Accounts for the year ended 30 April 2018

CONTENTSCONTENTS

Strategic ReportOUR BUSINESS

IFC Overview2 Chairman’s Letter3 Highlights4 Group at a Glance6 Our Business Model

Strategic ReportOUR PERFORMANCE

8 Our Strategic Priorities9 Chief Executive’s Report16 Our Competitive Advantage18 Strategy by Market21 Chief Financial Officer’s Report25 Key Performance Indicators26 Our Risk Management30 Corporate Responsibility

OUR GOVERNANCE42 Board of Directors44 Executive Committee45 Corporate Governance55 Audit Committee Report58 Remuneration Committee

Chairman’s Letter59 Annual Remuneration Report69 Directors’ Remuneration Policy81 Directors’ Report85 Statement of Directors’ Responsibilities

OUR FINANCIALS86 Independent Auditor’s Report93 Consolidated Income Statement94 Consolidated Statement of

Comprehensive Income95 Consolidated Balance Sheet96 Consolidated Cash Flow Statement97 Consolidated Statement of Changes in Equity98 Notes to the Consolidated

Accounts142 Company Balance Sheet143 Company Statement of Changes in Equity144 Notes to the Company Accounts

SHAREHOLDER INFORMATION149 Group Five-year Record 150 Company Information151 Financial Calendar

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CHAIRMAN’S LETTER

DR PETER FELLNER CHAIRMAN

Dear ShareholdersI am pleased to report that Consort has delivered another good performance with underlying growth across the business. We have also made further progress on our development and innovation pipelines.

Financial performanceThe Group’s revenue increased by 5.8% to £311.1m with underlying sales growth in both divisions. Group EBIT before special items increased by 6.8% to £42.7m. The group is in a strong financial position with gearing at 1.7x Net Debt/EBITDA.

Innovation & developmentWe have continued to make solid progress on the Bespak development pipeline including starting to prepare for future product launches of our innovative Syrina® / Vapoursoft® auto-injectors. In Aesica, we have been awarded a multi-year supply agreement for an innovative API product as well as new finished dose and packaging contracts.

BoardAs part of our Board succession plan, I have decided that, after thirteen years on the Board including nine years as Chairman, the time is right to identify my successor. I have therefore informed the Board of my intention to step down, once the Board has found my successor. The Board has asked William Jenkins, our Senior Independent Director to lead the search for a new Chairman. I look forward to sharing further details as soon as a successor is appointed.

Our General Counsel and Company Secretary, John Ilett, has left the Group and we have appointed Andrew Jackson who will be joining us in early September from KP Snacks Limited. We thank John for his contribution and look forward to Andrew joining the Group. In the meantime, Paul Hayes, our Chief Financial Officer, has undertaken the role of Company Secretary supported by Iain Lindsay who is our Interim General Counsel.

OutlookConsort has delivered another year of good underlying revenue and profit growth in both divisions. Bespak has continued to grow its respiratory business while making great progress on its innovative Syrina® / VapourSoft® auto-injectors. Aesica is growing sales and margins supported by new API, finished dose and packaging contracts in a streamlined business structure.

We continue to deliver our organic growth strategy while considering potential acquisitions that allow access to new geographic markets and complementary technologies. The Board is confident of Consort’s future prospects supported by a robust financial position and a strong development pipeline. The Board’s expectations for the year remain unchanged.

DividendThe Board recommends a final dividend of 13.56p per ordinary share (FY2017: 13.21p) making a total dividend for the year of 21.0p (FY 2017: 20.3p). Subject to approval at the AGM on 5 September 2018, the dividend will be paid on 26 October 2018.

PeopleOn behalf of the Board I would like to thank all of our people for living the Company’s values and their contributions and commitment during the year.

DR PETER FELLNERCHAIRMAN


OUR BUSINESSStrategic Report

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HIGHLIGHTS

> Continued growth across our broad range of leading drug delivery devices > Ongoing support to Mylan on the potential launch of their generic Advair programme > Good progress in developing our Syrina®/Vapoursoft® auto-injectors for our leading global biopharmaceutical customer and further interest from other significant potential customers

> Agreement with our major biopharmaceutical customer to commence industrialisation activities for facilities, production processes and tooling for a potential product launch of the Syrina®/ Vapoursoft® auto-injector > Record volumes were manufactured at our German and Italian facilities with investments being made in new production lines to support growth

> Formal award of a significant multi-year active pharmaceutical ingredient (API) supply contract for an innovative new product at our Cramlington facility > Awards of finished dose and packaging contracts and renewal of long-term contracts with existing customers > New customers on the semi-continuous processing line and technology installed in our Queenborough site

100.0

184.8

311.1276.9 294.0

2014 2015 2016 2017 2018

Revenue(£m)

48.3 47.8

64.557.6

65.1

2014 2015 2016 2017 2018

Adjusted Basic EPS1

(pence)

18.825.1

42.737.0

40.0

2014 2015 2016 2017 2018

Underlying EBIT1

(£m)

20.718.1

21.019.3 20.3

2014 2015 2016 2017 2018

Dividend Per Share(pence)

Operational Highlights

Financial Highlights

1 Underlying figures are as defined in the Alternative Performance Measures section on page 107 and are stated before special items of £20.9m that include amortisation of acquired intangibles, reorganisation and impairment costs (FY2017: £13.7m).


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GROUP AT A GLANCE

BESPAK – DEVICES AESICA – DRUGS

The Group

• A global market leader in the development and manufacture of premium drug delivery devices, serving pharmaceutical companies with inhaler, auto-injector, nasal and ocular technologies, and development and manufacturing services

• Premium capabilities in the manufacture of more than 500 million devices per year in regulated markets

• One of only a handful of operators globally who have the know-how and expertise to consistently deliver above Six Sigma quality for high volume medical components and devices

• The Group’s customers include some of the world’s largest pharmaceutical companies

• Significant product invention and development resources in R&D including a separate Innovation team in Cambridge, United Kingdom

• High barriers to entry: heavily embedded customer relationships, intellectual property, know-how, regulatory approvals, manufacturing complexity and economies of scale

• Robust finances: profitable, cash generative, low gearing and well supported dividend

• A leading pharmaceutical CDMO serving pharmaceutical companies with API and finished dose formulation development and manufacturing services

• The only independent CDMO with semi-continuous manufacturing capabilities

• A leading global Contract Development & Manufacturing Organisation (CDMO), providing advanced delivery technologies, formulation and manufacturing solutions for drugs

• We offer customers a single source for drug and device development, formulation, manufacturing and fill/finish, from two integrated operating divisions:

Who we are

Our divisions



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UNITED KINGDOM

Milton Keynes (Bespak manufacturing)3

Hemel Hempstead (Consort HQ)7

62

4

37 5

21

GERMANYMonheim (Aesica FDM)8

Zwickau (Aesica FDM)9

89

ITALYPianezza (Aesica FDM)10

10

King’s Lynn (Bespak manufacturing)1

Cambridge (Innovation Centre)2

Nelson (IAC)4

Cramlington (Aesica API)6

Queenborough (Aesica API/FDM/FDD)5

UNITED KINGDOM



62

4

37 5

21



89


10



Nelson (IAC)4



UNITED KINGDOM



62

4

37 5

21



89


10



Nelson (IAC)4



UNITED KINGDOM



62

4

37 5

21



89


10



Nelson (IAC)4



Sales presence in China, India, Japan, North and South America

LOCATIONS


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OUR BUSINESS MODEL

Consort Medical plc is a leading one-stop developer and manufacturer of drugs and premium drug delivery devices. We partner with pharmaceutical businesses in providing innovative life improving treatments to patients across the world. Our business model is focused on providing an integrated service to our pharmaceutical and biopharma customers.

DELIVERING NEW PRODUCT DEVELOPMENT AND INNOVATION TO SERVICE CURRENT AND NEW CUSTOMERS WITH PREMIUM PRODUCTS

OPERATING IN A GROWTH MARKET OF INCREASING HEALTHCARE NEEDS

• Ageing and growing population

• Growing developing markets

• Clinical and technology advances

• Long history of global supply with a track record of building strong customer partnerships

• Good customer service with established customer relationships and a diverse customer base

• Customer feedback

• Technology advances

• Industry trends

• Patient feedback

• Commercial research

• Continue to develop our own product innovations through in-house Innovation Team

• Remain committed to investing in new patient, clinician and customer-driven treatments

• Proprietary injectables technology provides access to high growth biologics market

• Benefiting from being an early provider of serialisation technology

• Differentiated “one-stop” capability – devices and drugs

UNDERSTANDING THE NEEDS OF OUR CUSTOMER AS WELL AS THOSE OF PATIENTS



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• Health and safety

• Quality control

• Compliance expertise and experience with FDA, MHRA, ANVISA, Russia and Japan

• Bespak – know-how and expertise to consistently deliver above Six Sigma quality for high volume regulated pharmaceutical components and devices

• Aesica – mature brands and the ability to manage the complexity of multiple lower volume SKUs; high potency and controlled drug capabilities

• Evaluate selective acquisitions and investments

• Clear acquisition criteria

• Targeting complementary opportunities that present attractive long-term shareholder value

MANUFACTURING TO THE HIGHEST QUALITY AND REGULATORY STANDARDS

COMPLEMENTED WITH SELECTIVE M&A AND INVESTMENTS

MAINTAINING A CULTURE OF CONTINUOUS IMPROVEMENT IN MANUFACTURING


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OUR STRATEGIC PRIORITIES

Strategic Priorities Our Focus

SUSTAINABLE ORGANIC REVENUE GROWTH

MARGIN IMPROVEMENT

INVESTING IN INNOVATION

SELECTIVE M&A AND INVESTMENTS

• Market leading technologies and products• Highest levels of technical and regulatory expertise• Deep, long-term customer relationships & contracts• Broad range of programmes and capabilities

• High margin drug delivery device business• Delivering continued margin improvement in Aesica• Good operational leverage

• Well-established development programmes in both divisions

• Developing our own product innovations while committed to investing in new patient, clinician and customer-driven treatments

• Differentiated “one-stop” capability

• Track record of successful acquisitions and integration

• Strategy to access new geographic markets & complementary technologies

• Clear criteria to generate sustainable long-term shareholder value


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OUR PERFORMANCE

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CHIEF EXECUTIVE’S REPORT

JONATHAN GLENN CHIEF EXECUTIVE OFFICER

Good financial and operational performance across the GroupConsort has again delivered good underlying growth across both businesses. Bespak has delivered revenue and underlying EBIT growth with strong sales of its core respiratory products. Aesica has grown its sales with recent contract wins and has achieved a further improvement in its margins. The Group has made good progress in its development pipeline, including its innovative Syrina®/Vapoursoft® master development agreement, and is working on new opportunities with current and potential new customers.

Summary of financial performanceGroup revenue increased by 5.8% to £311.1m (FY2017: £294.0m) with underlying growth of 4.4% at constant exchange rates.

EBIT before special items increased by 6.8% to £42.7m (FY2017: £40.0m) and by 5.3% at constant exchange rates.

Special items before tax were £20.9m in the year (FY2017: £13.7m). This comprised: £12.1m of amortisation of acquired intangibles; £4.6m of reorganisation costs; and £4.2m of non-cash impairment charges. These relate to the successful streamlining of the business completed during the year and the one-off impairment of equipment in a non-core activity.

Finance costs at £4.5m were in line with the prior year (FY2017: £4.4m). Group earnings before tax and special items increased by 7.3% to £38.2m (FY2017: £35.6m). Adjusted basic EPS decreased by 0.9% to 64.5p (FY2017: 65.1p) as the previous year included a particularly low tax charge. Basic EPS declined by 28.8% to 32.9p (FY2017: 46.2p) as a result of the restructuring and impairment charges during the year and the low tax charge in the prior year.

Cash generated from operations was £37.1m (FY2017: £48.9m). EBITDA before special items grew £3.7m (7.0%) to £56.4m (FY2017: £52.7m) which was offset by higher capital investments of £22.2m (FY2017: £18.1m) and increased working capital including higher receivables due to the timing of sales. Special items paid in the year were £2.0m (FY2017: £2.7m).

The Group balance sheet remains strong with a net debt position of £95.5m (FY2017: £92.6m), representing gearing of 1.7x Net debt: EBITDA. The Group is appropriately financed with a c.£160m committed multi-currency banking facility.

The Board is proposing an increased final dividend of 13.56p (FY2017: 13.21p), making a total dividend for the year of 21.0p (FY2017: 20.3p).

REVENUE

£311.1mUP 5.8%

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CHIEF EXECUTIVE’S REPORT CONTINUED

DELIVERING THE GROUP’S STRATEGYConsort Medical has a well-established strategy, which has four key elements:

1 Driving sustainable organic revenue growth

Consort is driving sales growth through leveraging its strong relationships with existing customers, developing opportunities with new customers and broadening its product offering.

We have deep, long-term contractual relationships with many leading pharmaceutical companies in both Bespak and Aesica, supplying customers with high quality products from our highly regulated facilities. There is a broad range of existing production programmes where we work closely with customers to support their growth strategies. We supplement this with development opportunities by providing innovative solutions utilising our market-leading expertise.

We made good progress in the period including continuing to grow sales of our core respiratory metered dose inhaler (MDI) valves and dry powder inhaler (DPI) devices. We have a strong pipeline of device opportunities and we provide a summary of the more significant Bespak opportunities below. In Aesica, there is also a significant amount of activity on API manufacturing and finished dose development where we continue to quote for a number of new opportunities. We are excited by the opportunities but can only provide a broad overview of what is commercially sensitive information.

2 Delivering margin improvement

The Group has continued its track record of improving underlying EBIT margin. This notably includes an additional 80bps improvement of Aesica’s margin during the year. Since the acquisition of Aesica we have made good progress having increased margin from 5.2% at acquisition to 8.8% during this year. Our medium-term margin expectations for the business remain unchanged. Our strategy is to deliver further organic growth and a continued process of improving our operational efficiency. During the year we successfully executed restructuring activities in the UK to streamline the business.

While delivering margin improvement we will continue to invest across the Group in our strong product innovation and development capabilities, both important elements of our growth strategy.


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3 Innovating and developing new devices and formulation technologies

Utilising our core expertise and strong relationships, we also partner with pharmaceutical businesses in developing and providing innovative life improving treatments and are committed to investing in patient, clinician and customer driven innovation to create new treatments.

Since 2010, Consort has consistently invested in innovation and expanded from a predominantly respiratory products business to growing positions in a number of attractive markets. We have well-established development programmes in both divisions, including new devices, APIs and finished dose formulations.

Optimising our world-class drug delivery device development and manufacture, together with drug API and finished dose formulation and manufacture within the Group, streamlines and accelerates our pharmaceutical customers’ drug route to market. This one-stop capability of being able to develop and manufacture both a drug and its delivery device within a single group is a key differentiator to our competitors.

The Group has continued to broaden its capabilities including growing its medical device business by adding highly innovative proprietary injectable delivery technologies to its well-established respiratory franchise.

Our injectables activities include an innovative gas powered auto-injector technology designed to support the safe operation of single-use syringes capable of injecting higher viscosity liquids. There is a growing demand for products serving this technically challenging area particularly with the growth of large molecule biological drugs which are often highly viscous. We are developing specific products using our proprietary technology, including a significant programme with a leading global biopharmaceutical customer.

We offer sterile oral liquid dose manufacturing as part of our broad range of finished dose capabilities within Aesica. This is supported by our finished dose development team. Our strategy is to further differentiate our capabilities by investing in pre-filled syringe capacity. This will enable the Group to provide a complete range of pre-filled syringe solutions to our customers including our unique auto-injector device technology.

Consort believes that the auto-injector business has the potential to be at least the size of the respiratory franchise in the medium to long term.

We have continued to make good progress particularly on our nasal and injectable technologies and we provide further details on these below.

4 Making selective acquisitions and investments

Consort generates strong free cash flow that supports investment in organic growth and has allowed us to grow the dividend in recent years. The strategy is to supplement this with appropriate strategic investments.

Our non-organic growth strategy is to make selective acquisitions or investments in new geographical markets and complementary technologies that have the potential to broaden our geographic footprint and customer base.

We will continue to review appropriate opportunities that present attractive long-term shareholder value.

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Bespak has built a well-established and diverse business of designing, developing and manufacturing high performance medical delivery devices. This business has a strong pipeline of innovative products including: respiratory, injectable, nasal and ocular drug delivery, as well as point of care diagnostics.

Once again, Bespak performed well during the year with increased demand for its broad range of leading advanced medical delivery devices. This growth was with established customers while continuing to invest in and make good progress on development programmes.

Revenue grew 4.8% to £126.9m with good growth of product sales that grew by 12.5% during the period. This includes continued growth in sales of our market leading MDI valves to over 90 commercial products. The broad range of products and programmes has grown over many years and we continue to supplement it with new products including our proprietary EasifillTM MDI primeless valve. We have also continued to see growth in sales of our DPI products. This growth in product sales reflects the successful transition of a number of programmes from development into commercial production.

As anticipated, service revenue decreased during the year to £8.4m (FY2017: £15.8m). This is due to a number of successful development programmes now being reflected as commercial product revenue following approval and launch. In addition, the comparative period included revenue from Nicovations which is no longer in the development pipeline.

Bespak delivered a 1.5% increase in EBIT to £26.5m and maintained a sector leading margin of 20.9%, which was 70bps lower than the particularly high margin in the prior year. This is after our continued investment of our product development resources in our proprietary technology including the development of innovative auto-injectors.

Product developmentBespak has a wide range of production programmes supported by a broad product development pipeline that present further growth opportunities. This development pipeline is across a range of therapeutic areas, including both contract manufacturing and products with our own proprietary intellectual property (IP).

To provide visibility of the business’s strong position, we have set out in the table below a summary of our more significant development opportunities recognising that timescales are difficult to predict. For inclusion in the table, projects must have a reasonable expectation of success and are forecast to produce peak annual sales of at least £3m per annum.

We continue to work closely with Mylan in supporting their generic Advair programme. This is subject to Mylan receiving a positive response from the FDA on their resubmitted Abbreviated New Drug Application (ANDA) filing. There is a target action date from the FDA of 27 June 2018. Mylan have recently publicly confirmed that they have been building inventory ahead of a potential launch. If the programme is approved, Bespak’s sales outlook will reflect Mylan’s launch strategy taking into account the level of inventory that Mylan are already carrying.

Bespak Business Review (Devices)Operations

FY20181 FY20171 Δ% Reported Δ% CER2

Revenue £126.9m £121.1m 4.8% 4.8%EBITDA3 £32.7m £32.1m 1.9% 1.9%EBITDA margin % 25.8% 26.5%EBIT3 £26.5m £26.1m 1.5% 1.5%EBIT margin % 20.9% 21.6%

1 Underlying figures presented above are defined by our Alternative Performance Measures (APM) methodology. 2 CER – at constant exchange rates; FY2017 actuals retranslated at the FY2018 average rate. 3 Before special items of £6.4m that include amortisation of acquired intangibles, reorganisation and impairment costs (FY2017: £0.8m)


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We continue to make good progress with the Syrina® / Vapoursoft® auto-injector development contract with our leading global biopharmaceutical customer. This programme is now progressing towards commercialisation with a recent agreement for Bespak to start planning for investments in production processes to support a future potential product launch. This will provide sufficient lead

time to prepare the investment in production processes at our Milton Keynes facility to ensure that manufacturing capacity comes on line to support the customer’s product launch. Product launch is subject to our customer making the appropriate filing, conducting a clinical trial and gaining regulatory approval. We are also examining additional auto-injector opportunities with this customer and other potential customers.

Further programmes include additional respiratory product opportunities and continued progress on point-of-care, nasal and ocular programmes. The current status of the major programmes in our development pipeline is listed below:

PROJECT DESCRIPTION CUSTOMER STATUS

VAL020 MDI valve Global Pharma Programme under review by customer

POC010 POC Test Cartridge Atlas Genetics Combined Chlamydia / Gonorrhoea test cartridge development progressing

NAS020 Nasal device Global Generic Programme under review with customer

DEV610 DPI Mylan Awaiting FDA approval

NAS030 Nasal device Pharma Co. Early stage programme

INJ650 ASI® Auto-injector Global Generic Early stage programme

INJ700 Lila® Mix Injector Pharma Co. Development programme on track

IDC300 Oral IDC Pharma Co. Customer received Complete Response Letter (CRL); Launch still expected in 2018

VAL050 MDI valve / actuator Aeropharm Development contract ongoing

OCU050 Ocular device/ formulation / filling Oxular Early stage programme

SYR075 Syrina® / Vapoursoft® Global Biopharma Progressing well to commercialisation

DPI = Dry Powder Inhaler, MDI = Metered Dose Inhaler, POC = Point of Care, IDC = Integrated Dose Counter

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InnovationThe Innovation Team is based in a dedicated facility in Cambridge and continues to work on multiple opportunities. We continue to fund a significant investment in developing our new technology platforms and growing our proprietary technology for a range of opportunities.

We continue to invest in and grow our innovation team due to the growing interest in the injectables franchise from biotech and pharmaceutical companies that complement our current customer portfolio.

In addition, the Bespak proprietary nasal programmes include unique IP protected technology that accurately delivers a single precise dose of a pharmaceutical product to a patient. This Unidose® Xtra product in conjunction with the proposed Aesica sterile fill capability has the potential to provide significant growth opportunities for the Group.

Aesica develops, formulates and manufactures APIs and finished dose drugs to the highest quality standards. It has strong and well-established relationships with many of the world’s leading pharmaceutical companies and works closely with them to support their growth strategies. Aesica has regulatory approved facilities in the UK, Germany and Italy.

The business performed well with another successive year of sales growth and margin improvement. This included the benefits of successfully streamlining the business during the year.

Aesica revenue grew 6.5% to £184.2m (FY2017: £172.9m) or by 4.2% at constant exchange rates. This included record sales performances in both our German and Italian businesses with increased demand from the established customer base supplemented by opportunities with new customers.

This sales growth includes new business opportunities with new solid dose contracts awarded to our German business. We have gained contracts with new customers based on a strong track record in this market with potential to supply further products in the future.

We are also supporting a customer on a new innovative API. This multi-year supply agreement is for a complicated multi-stage process where we commenced manufacture in the second half of the year.

In addition, we have secured new customers for our semi-continuous processing line and technology installed at the Queenborough site in the UK. We are continuing to explore opportunities with further customers and support them with their development work.

Aesica business review (Drugs)Operations

FY20181 FY20171 Δ% Reported Δ% CER2

Revenue £184.2m £172.9m 6.5% 4.2%EBITDA3 £23.6m £20.6m 14.6% 11.3%EBITDA margin % 12.8% 11.9%EBIT3 £16.2m £13.9m 16.5% 12.4%EBIT margin % 8.8% 8.0%

1 Underlying figures presented above are defined by our Alternative Performance Measures (APM) methodology. 2 CER – at constant exchange rates; FY2017 actuals retranslated at the FY2018 average rate. 3 Before special items of £14.5m that include amortisation of acquired intangibles, reorganisation and impairment costs (FY2017: £12.2m).


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The growth in sales and continued focus on our operational performance has resulted in a 16.5% improvement in EBIT to £16.2m (FY2017: £13.9m) or 12.4% at constant exchange rates. We continue to focus on improving the operational performance of this business including some restructuring activities that were successfully delivered during the period.

Aesica has achieved another successive increase in margin which increased by 80bps to 8.8%. The business has consistently improved its margins since its acquisition in 2014 when it was making a 5.2% return. We remain on track for delivering a double-digit margin from this business.

Business development and innovationAesica has deep, long-term relationships with a strong, blue-chip customer base. These relationships are supported by contracts that typically range between three and ten years generating recurring revenues, the majority of which are renewed at their end of term. Our technological and regulatory expertise supports Aesica in providing a broad variety of high quality products to many markets. These long-term relationships from our approved sites enable us to provide additional products and services in partnership with these valued customers.

The Aesica commercial team is focused on a growing number of formulation development and manufacturing opportunities. This includes businesses looking for support on new products and pharmaceutical companies looking to either out-source an activity or change suppliers. Aesica’s business development team has a regional structure to ensure that we can effectively support our customers from our manufacturing facilities in the UK, Germany and Italy.

Aesica’s track record provides potential customers with an established partner able to provide a high level of service supported by regulatory compliance. We have regular routine compliance audits from many regulatory bodies including the MHRA, FDA, Russian HA and many other regional regulatory authorities. We share our regulatory expertise across the wider Group.

The business has identified a number of attractive business development opportunities with pharmaceutical companies looking to source oral products and has seen further growth in demand for its liquid formulation services at the Pianezza site in Italy. This is supported by an investment under way in an oral production line to increase capacity in this facility which is operating at record levels. We are also planning to invest in pre-filled syringe manufacturing capacity to further expand our capabilities in this growing market.

In addition, we are expanding our packaging capabilities in Germany to support this growing business that has achieved record sales in the year. This is alongside continued strategic investments across the Group in serialisation which facilitates the identification of products at the individual pack level. Aesica is well advanced in developing its service to support and take on customers for the next wave of countries adopting serialisation including many across the EU.

JONATHAN GLENNCHIEF EXECUTIVE OFFICER

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OUR COMPETITIVE ADVANTAGEConsort Medical has a clear well-established growth strategy based on its leading position as a one-stop developer and manufacturer of drugs and premium drug delivery devices.

• Consort Medical has a 50+ year track record of partnering with many of the world’s largest pharmaceutical companies in providing innovative life improving treatments

• A long history of global supply with a track record in building strong partnerships; good customer service with established customer relationships and a diverse customer base

• The drug/device development, formulation and manufacturing services which Consort Medical offers its customers typically have long life cycles

• Pharmaceutical customers invest significant resources in launching, marketing and building their treatment franchises which often have high rates of repeat prescription

• Typically, Consort Medical is heavily embedded in its customers’ supply chains – core business demand is typically stable, predictable and often recurring providing relatively high visibility of future revenues

• Bespak is a world leader in valve technology development and manufacture with a strong market position in both pMDI (metered dose inhaler) and DPI (dry powder inhaler) technologies

• Bespak is one of only a handful of operators globally with know-how and expertise to consistently deliver high volumes of regulated pharmaceutical components and devices

• Aesica offers an end-to-end service with API, development centre and finished dose capabilities

• Aesica has mature brands and the ability to manage the complexity of multiple lower volume SKUs

• Aesica’s manufacturing capabilities include high capacity, high potency and innovative semi-continuous manufacturing – the only independent CDMO with semi-continuous manufacturing capabilities

• Operating in a highly regulated industry with quality standards that are world class

• Compliance expertise and experience with FDA, MHRA, ANVISA, Russia and Japan regulatory authorities

• Bespak manufactures over 2.6 billion components, assembled into more than 500 million devices, annually – one of only a handful of operators globally who have the process know-how and expertise to consistently deliver above Six Sigma quality on such a high volume of medical components and devices

• Aesica has made significant investments in facilities and technology with the aim of ensuring “best in class” quality and reliability

The Group’s strategy is built on four strategic priorities:1 Driving sustainable organic revenue growth

2 Margin improvement

3 Investing in innovation

4 Selective M&A and investments

A fuller description and progress on these priorities is described on page 8.

LONG-TERM, HEAVILY EMBEDDED CUSTOMER RELATIONSHIPS

CONSIDERABLE TECHNICAL EXPERTISE AND HIGHLY COMPLEX MANUFACTURING

PREMIUM QUALITY AND REGULATORY TRACK RECORD

The Group has an established competitive advantage:


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• Long-term contracts with clear visibility of customer requirements at agreed pricing levels

• Established manufacturing facilities and a focus on working capital management

• Clear priorities for investing in plant and equipment to support future growth

• Well supported dividend

• Consort Medical remains at the leading edge of innovation and is committed to investing in patient and customer driven innovation with the potential to create new treatments, new markets and new opportunities.

• Our injectable products include our innovative proprietary Vapoursoft®-powered technologies that continue to generate widespread interest – several pharma/biopharma companies are initiating feasibility & development programmes

• Capability to produce self-administration of viscous drug formulations – targeting fast growing biologics market

• Aesica has benefited from being an early provider of serialisation services to the pharmaceutical industry in early adopting regions including China and Latin America

• With further investment in our serialisation capabilities, Aesica is well advanced in developing the service for the next wave of countries adopting serialisation (including the EU) with flexible solutions that can meet specific territorial regulations

• Devices and drug manufacturing sites are defined and licensed as part of the drug master file and, therefore, sourcing is protected

• Consort Medical leverages its significant process and production know-how, operating a dual strategy of the contract manufacturing of customer products and, through Bespak, the supply of its own proprietary delivery device technologies, the IP for which is heavily protected

• This value delivery to the customer yields attractive margins, while affording protection from potential new market entrants

STRONG CASH GENERATION DRIVEN BY INNOVATION HIGH BARRIERS TO ENTRY

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STRATEGY BY MARKET

Consort Capabilities/Technologies• We design and manufacture

premium drug delivery devices for the treatment of respiratory diseases

• The Group provides high quality products to our pharmaceutical customers: – Metered dose inhaler (MDI) valves

– Contract manufacturing MDI and dry powder inhaler (DPI) products

– Medical check valves

Market Dynamics:• The market for inhaled drug delivery

devices is forecast to reach US$43 bn in 2024, growing at an estimated CAGR of 3.3% between 2016 and 2024

Growth Drivers: • The respiratory sector is one of the

most highly regulated healthcare markets, with high barriers to entry

• A number of key drugs are shortly coming “off patent”, resulting in a number of new generic entrants and associated opportunities for Consort to supply both MDI and DPI devices

• Although the traditional Western economies are mature and have slower growth, significant volume growth is being seen in emerging markets including the Brazilian, Russian, Indian and Chinese (BRIC) markets

Consort Strategy: > The Group’s strategy is to increase its already strong share of the respiratory market; this will include the development of new drug delivery devices and selling into new and developing geographical markets

> The Group also offers customers finished dose formulation and manufacturing services and integrated drug/device development, formulation and manufacturing services

> The Group will continue to leverage its continuous improvement activities to maintain its competitive position and support its customers as products move into the mature stage of their product life cycle

Consort Capabilities/Technologies: • Consort develops and manufacture

auto-injectors including an innovative gas powered auto injector technology designed to support the safe operation of single-use syringes

• These devices are capable of injecting high viscosity liquids and are marketed under the Syrina®, Lila® and Lapas® brands

• We are working closely with a number of major pharmaceutical customers

Market Dynamics:• The injectable drug delivery market

is forecast to reach US$625 bn in 2021, growing at an estimated CAGR of 11.5% between 2016 and 2021

Growth Drivers: • Growth is being driven by a large

number of new drugs coming to the market for the first time that require delivery by injection

• Whilst Bespak currently has a negligible share of this market, it is estimated that c.40% of all new drugs in development will be delivered parenterally and may, therefore, require some form of auto-injector

• Many of these new “large molecule” biologic drugs are highly viscous and require specialist devices to enable them to be effectively administered, often by patients themselves in a non-clinical environment

• The continued drive to greater self-administration with the associated improvements to patient compliance, patient outcomes and healthcare economics will create significant opportunities for the Group

Consort Strategy: > Our Syrina®, Lila® and Lapas® range of auto-injectors positions the Group well to participate in this growing market

> Our strategy is focused on the commercialisation of the existing pipeline in conjunction with the development of further IP and the exploitation of “innovation on demand” opportunities through our growing Innovation team in Cambridge

> Endorsing this strategy, in FY2017 we signed a significant new master development agreement for our proprietary Vapoursoft® Syrina® auto-injector technology with a leading global biopharmaceutical company

> Consort Medical intends to continue to move up the value chain by offering assembly and drug handling and will continue to look for additional, selective acquisitions in this area

INHALED

INJECTABLE


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Consort Capabilities/Technologies: • Consort has designed and

developed a single-use device for nasal drug delivery

• We are working with a number of pharmaceutical customers to support them on a variety of programmes

Market Dynamics:• The nasal drug delivery technology

market is forecast to reach US$64 bn in 2021, growing at an estimated CAGR of 6.5% between 2016 and 2021

Growth Drivers: • Growth is being delivered from

two main areas: – A number of existing branded drugs are coming off patent leading to generic entrants, all requiring their own delivery system as the original device associated with the branded drug is normally unavailable to them

– Secondly, the nasal drug delivery route is extremely effective and a number of existing and new drugs are being reformulated to enable delivery in this way, increasing demand for this type of drug delivery product

Consort Strategy: > The Group’s strategy for the nasal market is focused on the delivery of Consort’s existing development programmes

> There are further opportunities utilising the Group’s growing IP portfolio via a number of “innovation on demand” opportunities

> The Group can also offer customers finished dose formulation and manufacturing services as well as integrated drug/device development, formulation and manufacturing services

NASAL

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STRATEGY BY MARKET CONTINUED

Consort Capabilities/Technologies: • Strategic development and

manufacturing agreement with Atlas Genetics

Market Dynamics:• Forecast to reach US$38 bn

by 2022, growing at an estimated CAGR of 10.0% between 2017 and 2022

Growth Drivers: • Market growth is being driven by

the combined benefits of increased patient compliance, improved patient outcomes and lower cost of provision

• Pharmaceutical companies are looking to exploit POC systems as part of a companion diagnostics strategy where drugs and tests are sold as combined “test and treat” packages

Consort Strategy: > The Group’s POC Diagnostics strategy is focused on the commercialisation of the Atlas Genetics device as a first stage penetration of the market

> Substantial progress has been made in the last year in the POC card development, in conjunction with Bespak who separately provide development and manufacturing services to Atlas, and with the development of the card reader and assay tests

> Following a successful outcome to this programme, Consort Medical intends to leverage the Group’s development, manufacturing and regulatory know-how in order to grow its market share, possibly in conjunction with additional selective investments or acquisitions

POINT OF CARE (POC)

Consort Capabilities/Technologies: • The Group has a broad range of

oral delivery capabilities and drug formulation and manufacturing services

• Our capabilities include the manufacture of active pharmaceutical ingredients, tablets, capsules and liquids

• We can package these products in bottles, blister packaging, sprays, pouches, ampoules and vials to specific customer requirement

Market Dynamics:• The global oral drug delivery

market is forecast to reach US$100 bn in 2018, having grown at an estimated CAGR of 9.4% between 2013 and 2018

Growth Drivers: • The implementation of different

technologies for oral drug delivery is changing the market scenario

• There are high levels of attention from pharmaceutical companies due to the advantages that research can provide, such as reformulations, which can reposition drugs and delay patent expiry

Consort Strategy:• The Group has a broad range

of customer relationships and its strategy is to continue to drive organic growth in oral drug formulation and manufacture

• This strategy also includes building relationships with new customers by offering premium drug formulation and manufacturing services

ORAL


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CHIEF FINANCIAL OFFICER’S REPORT

PAUL HAYES CHIEF FINANCIAL OFFICER

Consort has again delivered growth in revenue and underlying EBIT in both divisions. This good performance was achieved while continuing to invest in the business to support its broad range of development opportunities. The Group has a strong track record of delivering continued sales and EBIT growth since the Aesica acquisition in 2014.

TradingGroup revenue grew by £17.1m (5.8%) to £311.1m with 4.4% of underlying growth and the benefit from translating our overseas results at more favourable exchange rates. Both the Bespak and Aesica divisions grew during the year and EBIT before special items increased by 6.8% to £42.7m. There was 5.3%

of underlying EBIT growth before the impact of favourable exchange rates. This growth in EBIT reflected the benefit of sales growth and improved productivity particularly in Aesica. Group underlying EBIT margin increased marginally to 13.7% (FY2017: 13.6%).

Finance costs & Profit before taxFinance costs at £4.5m (FY2017: £4.4m) were in line with the prior year.

Increased EBIT before special items and a similar level of finance costs led to an increase in Profit Before Tax before special items of 7.3% to £38.2m (FY2017: £35.6m).

100.0

184.8

311.1276.9 294.0

2014 2015 2016 2017 2018

Revenue£m

48.3 47.8

64.557.6

65.1

2014 2015 2016 2017 2018

Adjusted basic EPSPence

17.522.4

38.232.3

35.6

2014 2015 2016 2017 2018

PBT before specials£m

UNDERLYING EBIT

£42.7mUP 6.8%

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Special itemsSpecial items are those items which the Group considers to be non-recurring or are not part of the underlying performance of the business. In FY2018 special items amounted to £20.9m (FY2017: £13.7m) and comprise £12.1m of amortisation of acquired intangibles (FY2017: £13.0m); £4.6m of reorganisation costs (FY2017: £0.5m); and £4.2m non-cash impairment of fixed assets (FY2017: £nil). The reorganisation costs were incurred in streamlining the business and were successfully delivered on plan during the period. This included improving the operations within Aesica, the closure of some non-core operations in Bespak and the impairment of some specific assets.

Statutory profit before tax was £4.6m lower at £17.3m (FY2017: £21.9m) as a result of these special items.

TaxationThe underlying tax charge amounted to £6.6m (FY2017: £3.8m) delivering an effective tax rate (ETR) of 17.3% (FY2017: 10.7%). The Group’s ETR was particularly low last year as it included some prior year adjustments that have not recurred this year. The ETR reflects a combination of factors including the continuing benefits of the Patent Box regime and the increased proportion of profit arising in our European businesses with higher tax rate jurisdictions.

The Group benefits from the Research and Development Expenditure Credit (RDEC) and realised an R&D tax credit of £2.2m in the year (FY2017: £1.8m) that is recognised in operating profit and benefits both Bespak and Aesica.

Respiratory – MDI 53.6%Respiratory – DPI 33.1%Other 13.3%

Respiratory – MDI 53.6%Respiratory – DPI 33.1%

Respiratory – MDI 50.6%Respiratory – DPI 28.5%Other 20.9%

Bespak revenue by product type 2018

Bespak revenue by product type 2017

Bespak continues to benefit from the progressive implementation of the UK’s Patent Box regime on earnings from its patented products amounting to a benefit in the year of £1.9m in its cash tax (FY2017: £1.7m).

A tax credit of £5.4m (FY2017: £4.5m) arose in respect of special items. The total tax charge was £1.2m (FY2017: £0.7m credit).

The outlook for the ETR for FY2019 is 18%, subject to the mix of Bespak sales (IP and non-IP protected), and the mix of Aesica sales between UK, Germany and Italy.

The Group’s tax strategy continues to follow the commercial development of the business, while taking advantage of government tax incentive policies. The Group continues to be rated low risk by HMRC.

EarningsAdjusted earnings, being after tax but before special items, decreased by £0.2m to £31.6m (FY2017: £31.8m) with the higher tax rate more than offsetting the increase in Profit before tax. Adjusted basic EPS decreased by 0.9% to 64.5p (FY2017: 65.1p) accordingly.

Statutory Earnings after tax decreased by £6.5m to £16.1m with basic EPS at 32.9p (FY2017: 46.2p) as a result of profitable growth but a higher level of acquisition related costs and other special items.

DividendThe Board has reviewed the dividend and is proposing an increased final dividend of 13.56p (FY2017: 13.21p) making a total dividend for the year of 21.0p (FY2017: 20.3p).

The dividend will be paid on 26 October 2018 to shareholders on the register at 28 September 2018, if approved by shareholders at the AGM on 5 September 2018. Dividend cover, based on underlying EPS, was 3.1 times (FY2017: 3.2 times).

CHIEF FINANCIAL OFFICER’S REPORT CONTINUED


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Cash flow & Net debtCash generated from operations was £37.1m (FY2017: £48.9m) with the Group maintaining a continued focus on working capital management.

At the year-end the Group had higher receivables that were up £16.7m year-on-year (FY2017: £0.7m decrease) mainly due to the phasing of sales. The ageing of our receivables remains very good with our blue-chip customer base of global pharmaceutical companies. Inventories increased by £0.3m during the year (FY2017: £2.7m increase) and payables/provisions increased by £1.6m (FY2017: £2.4m decrease).

Capital expenditure of £22.2m was higher than the previous year (FY2017: £18.1m) including investments across the business to enhance facilities and expand manufacturing capacity and serialisation capabilities.

The Group free cash flow after special items was £12.5m (FY2017: £24.9m) that funded £10.1m of dividend payments (FY2017: £9.6m) and £2.1m of contributions into the pension plan (FY2017: £2.0m).

Net debt was £95.5m at the year-end (FY2017: £92.6m) or 1.7x EBITDA (FY2017: 1.7x).

Financing & LiquidityThe Group has a c.£160m multi-currency committed revolving credit facility with Barclays, Lloyds, RBS and Santander which expires in September 2019. At 30 April 2018, the Group had drawn £117.3m of this committed revolving credit facility (FY2017: £113.0m).Margins are between 1.2% and 2.2% over LIBOR depending upon the ratio of Net debt to EBITDA. A non-utilisation fee of the interest margin on the undrawn balance applies.

The facility has two covenants: Net debt to EBITDA less than 3.0x and Interest Cover over EBITDA being greater than 3.0x. The Group continues to operate within its covenants at 30 April 2018 with Net debt to EBITDA of 1.7x, and Interest Cover 23.2x.

The Group has an uncommitted £65m accordion facility by which further funding may be made available by the participating banks under current terms to support significant investment or acquisition opportunities which may arise. The Group also has uncommitted overdraft facilities in the UK of £4.5m and £1.1m which it utilises to manage its requirements for short-term operational funding.

The Group anticipates renewing its banking facility during the year ended 30 April 2019 in advance of the September 2019 expiry date and has had encouraging initial discussions with existing and potential new lenders.

Respiratory – MDI 50.6%Respiratory – DPI 28.5%

50%36%

14%

50%

35%

15%

Top 5Top 10Others

Customer dependency – FY2018

Customer dependency – FY2017

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CHIEF FINANCIAL OFFICER’S REPORT CONTINUED

Foreign currency exposureThe Group monitors its foreign currency exposures carefully and seeks to mitigate all material transactional exposures. Bespak currently has limited exposure to movements in the Euro and US Dollar and Aesica has wider exposure to the Euro. Where appropriate forward foreign currency is bought and/or sold to protect transactional margin exposure.

As a result of the Group’s German and Italian Euro denominated operations, foreign currency translation sensitivity for the Euro is such that a 10¢ strengthening/weakening in the Euro:GBP exchange rate increases/decreases revenue by c.£8.4m and EBIT by c.£1.1m.

PensionsThe IAS 19 pension valuation at 30 April 2018 was a total deficit of £14.7m (30 April 2017: £44.6m). The defined benefit pension obligations of the Group comprise both Bespak and Aesica schemes.

Bespak schemeIn 2002, the Bespak Retirement Benefits Scheme (a defined benefit pension scheme) was closed to new members. Furthermore, from 31 March 2016 the Scheme was closed to further accrual via a deed of amendment between the Group and the Trust. Following the Scheme closure, all former active members became deferred members and the provision of pension benefits was migrated to a defined contribution pension scheme which is also available to new employees.

As at 30 April 2018, the Bespak IAS 19 deficit was £10.4m compared with £40.6m as at 30 April 2017. The significant decrease in the deficit was primarily due to changes in the demographic assumptions in line with the recently agreed triennial valuation plus an increase in discount rates year over year.

The latest triennial actuarial valuation of the Bespak Pension Scheme was performed by an independent actuary for the trustees of the scheme and was carried out as at 30 April 2017. In April 2018, the Group and the Trustees agreed this actuarial valuation, which recorded a deficit of £37.3m. As part of the agreement, the Group undertook to make deficit recovery contributions at the following rates:• November 2017 – October 2019:

£2.5m per annum• November 2019 – October 2021:

£3.0m per annum• November 2021 – November

2029: £3.5m per annum

Pension deficit contributions for FY2018 totalled £2.0m in respect of the Bespak scheme, comprising six months at the previous contribution requirement of £1.5m per annum and six months at the revised contribution requirement of £2.5m per annum as detailed above. The Group also made contributions of £0.1m in respect of overseas schemes.

Aesica schemesAesica operates a number of different pension schemes, including defined benefit schemes in Italy and Germany. These schemes are in a total net IAS 19 deficit position of £4.3m at 30 April 2018 (30 April 2017: £4.0m).

Risk managementThe Group is exposed to a number of risks and considers effective risk management to be a high priority and as such operates a detailed framework for assessing risk and also processes and procedures to partly mitigate them which are further described in the Risk management section.

PAUL HAYES CHIEF FINANCIAL OFFICER


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KEY PERFORMANCE INDICATORS (KPIs)

KPI MEASURE FY2018 FY2017 DEFINITION / CALCULATION

GROWING THE BUSINESS

Group revenue at constant currency +4.4% +2.0% % increase/(decrease) in Group revenue at constant exchange rates1

Group EBIT at constant currency +5.3% +4.1%% increase/(decrease) in Group underlying EBIT2 (earnings before interest and tax) at constant exchange rates1

Group PBT +7.3% +10.4% % increase/(decrease) in Group underlying profit before tax2

Group operating margin 13.7% 13.6% Underlying EBIT2 divided by revenue

Net debt / EBITDA ratio 1.7x 1.7xRatio of Group net debt to Group EBITDA before special items2 (earnings before interest, tax, depreciation and amortisation)

DELIVERING VALUE TO SHAREHOLDERS

Adjusted basic EPS 64.5p 65.1pProfit after tax before special items2, divided by the weighted average number of shares in issue during the year

Total dividend per share 21.0p 20.3p Sum of interim and final dividends per share for the financial year

HEALTH AND SAFETY

RIDDORs across the Group 5 11Number of RIDDORs (Reporting of Injuries, Diseases & Dangerous Occurences Regulations) reported across the Group

ENVIRONMENT

Total emissions per £1,000 of sales 0.20 0.22 Emissions per £1,000 of Group sales measured in tonnes of CO2e

Total emissions per employee 28.9 29.0Emissions across the Group divided by the average number of employees during the financial year, measured in tonnes of CO2e

1 At constant exchange rates; FY2017 actuals retranslated at the FY2018 average rate.2 Underlying figures are as defined in the Alternative Performance Measures section set out on page 107.

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OUR RISK MANAGEMENT

Risk managementThe Board accepts responsibility for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. There is an ongoing internal process for identifying, evaluating and managing significant risks faced by the Group that is regularly reviewed by the Risk Committee, the Executive Committee, the Audit Committee and then by the Board. This process has been in place throughout the year and up to the date of this report.

The Risk Committee is responsible for advising the Executive Committee and the Audit Committee on the co-ordination and prioritisation of risk management issues throughout the Group and developing a risk management strategy; ensuring that the Board’s risk policy is implemented throughout the Group through effective development and review of risk registers, mitigation plans and insurance policies and promoting risk awareness at all levels.

A risk management strategy encompassing risk assessment and risk treatment has been

adopted with the key objective to ensure that risk management is an integral part of the strategic and operational management decision-making, planning and implementation process. Risk appetite and tolerance have been reviewed and agreed by the Board and will be considered annually and monitored as appropriate. The Group’s Strategic Plan is reviewed annually at an off-site meeting involving the Board and the Executive Committee. An annual budget is prepared by each of the operating divisions of the Group and this is consolidated into a Group budget, which is reviewed and approved by the Board.

Our Risk management framework

TOP DOWNOversight, identification, assessment and mitigation of risk at corporate level

BOTTOM UPIdentification, assessment and mitigation of risk at divisional level and across functional areas

THE BOARD

EXECUTIVE COMMITTEE

RISK COMMITTEE

INTERNAL AUDIT

OPERATIONAL LEVEL

AUDIT COMMITTEE

> Has overall responsibility for the Group’s risk management

> Determines the nature and extent of risk it is willing to take in achieving strategic objectives

> Reviews, agrees and monitors risk appetite and tolerance

> Provides direction on the importance of risk management to create a strong, risk aware control environment

> Assesses and mitigates risks throughout the Group

> Monitors risk management processes and controls

> Advises the Executive Committee and Audit Committee on risk management issues > Implements the Board’s risk policy through effective development and review of risk registers,

mitigation plans and insurance policies, and promoting risk awareness at all levels

> Advises the Risk Committee on the effectiveness of internal controls and risk management procedures > Recommends improvements in control processes and monitors management’s implementation of these

> Identify, assess and mitigate risks across the business

> Implement the Group’s internal controls

> Culture of risk awareness embedded at operational level

> Assists the Board in reviewing the adequacy and effectiveness of the Group’s internal controls and risk management systems


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Introduction to principal risksOur internal controls include risk management processes to identify principal risks and, where possible, to manage those risks through systems and processes and by implementing specific mitigation strategies. The most significant risks identified through our progressive review of the risk register that could materially affect the Group’s ability to achieve its financial and operating objectives are summarised in this section. Other risks are either unknown or deemed less material.

RISK CONTROLS AND MITIGATING ACTIONS TREND

Regulatory / Legal risk:The Group must comply with certain laws and regulations in different jurisdictions and regulated markets. This includes operating API and other manufacturing facilities and meeting the obligations within the scope of environmental and health and safety regulations. There are a number of risks including reputational damage, penalties and fines should we fail to comply.

A strong regulatory compliance regime is in place, which includes regular reviews and audits by both regulatory bodies and customers. The Group has an internal legal team and engages external specialists on national laws in the jurisdictions concerned. There are specific whistleblowing, anti-corruption and anti-bribery policies which all employees are required to comply with. Bribery Act training is given to employees.

Reliance upon key customers / products: Both Aesica and Bespak have a degree of reliance on a relatively small number of key customers/products and the loss of one such customer/product could lead to a significant reduction in revenues and profitability.

The Group has significant Intellectual Property with associated barriers to entry. Regulatory licensing reduces customers’ ability to transfer business elsewhere and the Group seeks to enter into long-term supply agreements where appropriate. The Group’s strategy of diversification has provided a broader range of products and customers to reduce customer and product concentration.

Growth / Acquisition risk: Delivery of organic growth carries the risk of execution due to allocation of resources and new areas of expertise. Failure to successfully execute or attain strategic objectives from the Group’s acquisitions may adversely affect the Group’s financial performance and position.

The Group has risk based planning processes that provide good visibility of anticipated resource requirements. The Board reviews potential acquisitions against a defined set of criteria, engages qualified advisors and ensures appropriate due diligence is performed before approving any transaction.

Major operational incident: A major incident (e.g. fire or chemical spill) at a manufacturing site may result in the disruption to a key supply chain and loss of assets, revenues and profit.

Where possible, manufacturing is split into discrete buildings for separate operations providing some level of isolation. Critical plant risk and remediation assessments are completed at each manufacturing site, and business continuity plans are also in place.

Key: Risk increase Risk decrease Risk unchanged

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OUR RISK MANAGEMENT CONTINUED


Product quality failure: The Group operates in highly regulated markets with strict quality requirements. Any quality failure involving the Group’s products could lead to loss of reputation, reduction in revenues, recall costs or sanction by the regulators.

The Group has rigorous quality management and assurance systems and processes. Any issues are tracked and reported to ensure that there is early communication with customers and regulatory bodies regarding any quality audits.

Human resources / People: The Group relies heavily on recruiting and retaining talented employees with a diverse range of skills and capabilities to meet its strategic objectives. An inability to attract and retain such employees could have a considerable impact on our success. In addition, we have completed some streamlining of the business during the year which has involved a number of positions becoming redundant.

Remuneration packages are reviewed on an annual basis in order to ensure the Group continues to attract and retain its employees. The Group is also committed to working on improving drivers of engagement, such as increasing employees’ understanding of our strategy, performance and core values. We have completed the restructuring exercises professionally with appropriate consultation with those affected.

Development risk: At any time, any of the Group’s products may fail in clinical trials, be withdrawn by the customer or may not become commercially successful once launched.

The Group follows rigorous processes for the development of new products. Where possible, Bespak is developing its device technology as a platform for multiple programmes to reduce the exposure to any individual trial. Aesica’s development services are on a fee per project basis, with the majority of its revenues coming from manufacturing services.

Pension schemes:The Group operates a number of defined benefit pension schemes. Changes to the valuation of the pension deficit can impact the level of distributable reserves and the ability to make distributions. Macroeconomic factors may result in substantial increases in the Group’s pension deficit, which could affect its ability to make future distributions.

The Group monitors distributable reserves prior to key reporting periods and these are reported within the Board dividend paper. There is open dialogue with the Pension Trustees to ensure that pension schemes are adequately funded. The most recent Triennial Valuation of the Bespak Pension Scheme has been completed and the deficit recovery funding requirements agreed.


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Political/Socio-economic risk (Impact of Brexit):The Group operates in a number of countries and is therefore subject to political and socio-economic risks which may impact both operational and financial performance.

The Group continually reviews political and economic policy changes in both the UK and global markets, including results of the ongoing Brexit negotiations, and assesses if there is any impact on the business by providing legal updates to the Board and the Executive Committee.

Financial risks:The Group faces a number of finance risks which include currency, liquidity, funding and interest rates.

Currency exposures are reviewed on a monthly basis and a hedging strategy is in place. Committed debt facilities are in place until September 2019 and the Group anticipates renewing its banking facility in advance of this expiry date.

IT / Cyber: The Group is dependent on information technology: its systems and infrastructure face certain risks, including service disruptions and the loss or theft of sensitive or confidential information, due to the inherent risks involved and the continued threat of cyber-crime.

The Group has a dedicated IT department who monitor and review access security; ensure that there are regular backups of confidential information and data; perform disaster recovery procedures when required; and manage investment in the Group’s IT infrastructure.

Corporate Social Responsibility: Our manufactured products or other activities/decisions of the Group may not be judged by the public, governments or other stakeholders as being socially responsible, leading to reputational harm.

The Group’s Corporate Responsibility Committee meets regularly, and is responsible for reviewing new programmes, assisting with resourcing and ensuring alignment to the overall Group strategy.

Key: Risk increase Risk decrease Risk unchanged

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CORPORATE RESPONSIBILITY

Our Group’s responsible business practices fall within the following key focus areas: • Health and Safety – ensuring the

safety and well-being of our staff• Environment – managing our key

environmental impact areas of energy, waste and water

• Employees – supporting our people to develop and thrive within the business

• Community – interacting positively with the communities in which we operate

• Ethical Standards – operating to the highest ethical standards

We remain committed to ensuring these activities become embedded in how we operate and contribute towards the success of our business. This includes not only identifying and managing risk but exploring opportunities to add value.

GovernanceWe hold three annual meetings of our Corporate Responsibility (CR) Committee, chaired by non-executive director Ian Nicholson. These meetings are attended by senior leaders from across the Group, with the aim to review current performance, and challenge the business in meeting future targets and objectives across each of our key focus areas.

IAN NICHOLSON CHAIR OF THE CORPORATE RESPONSIBILITY COMMITTEE

Summary of our key achievements

TARGETS – FY2018 PERFORMANCE VS. TARGET

Health and Safety• No more than five RIDDORs across the Group

Environment• Reduce energy consumption (kWh/£’000) across the

Group by 5% against the FY2016 baseline • Maintain our progress to divert waste from landfill/

incineration• Manage and reduce our use of water

Employees• Continue to drive a values-based culture with an emphasis

on customer focus in the coming year• Develop a competency framework for our values• Actively track progress and communicate on agreed

initiatives arising from the employee survey• Provide more opportunities for secondments across

the divisions• Introduce a Group-wide Graduate Recruitment

programme• Continue with our award-winning apprenticeship scheme

Community • Support the local communities where our sites are based

through charity work, education visits and careers fairs• Continue to support designated charities through

donations and employee contribution days

Ethical standards• To maintain high ethical standards across the Group


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Stakeholder engagementWe continue to engage with our key stakeholders to ensure we deliver against the objectives of our Corporate Responsibility strategy. This year we completed a stakeholder mapping exercise which identified our key stakeholders and channels for engagement. We continue to pursue open, relationship-driven communication with stakeholders in order to promote shared growth. We are careful to match the appropriate communication channel with each group, making every effort to reflect stakeholder feedback in our future policies and actions.

STAKEHOLDERS KEY ISSUES HOW WE ENGAGE

Shareholders • Corporate Governance• Business Ethics• Provision of fair balanced and understandable

information

• Investor Relations activities, AGM and roadshows

• Annual Report & Accounts• Corporate website

Customers • Understanding customers’ needs• Customer retention• Identification of new customers• Identification of growth opportunities

• Corporate and divisional websites• One to one meetings• Regulatory audits

Colleagues • Learning & Development• Health, Safety & Wellbeing• Diversity & Inclusion

• Intranet• Email bulletins and newsletters• Training programmes• Employee surveys• Town halls

Communities & Charities

• Positive contribution to the communities in which we operate

• School and Career events • Local charity involvement

Suppliers • Supply chain management • Supplier meetings• Regular business reviews• Supplier code of conduct

Regulators • Meeting regulatory compliance • Dialogue with regulatory & political bodies• Industry forums• Compliance audits

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CORPORATE RESPONSIBILITY CONTINUED

Our performanceTo ensure we continue to improve performance we set a number of targets and key performance indicators at the beginning of each financial year. Progress against these is then reviewed throughout the year by our CR Committee. The sections below provide a summary of performance across the Group against each of our focus areas.

Health and safetyThe safety and well-being of our staff and all visitors to our facilities is the number one priority for everyone within the business. We continue to focus on all aspects of health and safety, with a special emphasis on those areas with the potential to cause serious harm.

The number of RIDDORs (Reportable Incidents including those leading to seven Days Lost Time) reported across the Group remained low, totalling five against a target of five. The Group continues to monitor and analyse all RIDDORs. The RIDDORs reported during the year were all as a result of low risk activity and changes have been made to support prevention and recurrence. We have identified that individual behaviours contributed to the cause of each accident. This confirms the importance of driving the behavioural safety agenda while remaining focused on the high risk activities that could cause serious harm to our people.

In FY2018 Aesica’s sites in Cramlington and Pianezza have again achieved zero lost time accidents. Our Cramlington site has achieved more than 1,000 days and more than 1 million hours worked without a lost time accident and our Pianezza site has had no lost time accidents for 24 months.

Near-miss reportingThe Group continues to promote the reporting of near-misses (see table below). The decline in near-miss reporting this year does not reflect a negative shift, but falls in line with the reduction in accident numbers which can be attributed to continuous positive safety messaging.

FY2016 FY2017 FY2018Total 4,187 6,736 6,095Avg pcm 348 563 508

Sharing Environment, Health & Safety (EHS) Learning and Best Practice – Safety Pause and AlertsSharing of best practice and learning from near-misses and incidents has further developed across the Group. Closer integration of the EHS resources within the divisions continues with, for example, sharing of the EHS improvement activities.

The heads of EHS continue to meet regularly to discuss safety programmes and initiatives, share information including data around accidents, near-misses and agree any standard approaches to progressing the safety agenda across both divisions.

Initiatives to help enforce a strong safety culture include:• Bespak’s Behavioural Safety

Programme – following the launch of this programme to leaders in 2017, the second phase focused on understanding what behavioural safety means to the individual. The purpose of this was to reset a mind-set of just “getting the job done” or that “it’s always been done this way”

• Safety Slogan – to help engage employees on safety matters, Bespak launched a staff competition to design a safety slogan. The aim was to develop a catchy slogan to deliver a clear message that Safety is the number one priority for Bespak. The winning safety slogan was “Safe By Choice, Not by Chance” and this will also be rolled out across Aesica in the coming financial year

• Machinery safety – at Bespak machinery hazard control remains a high focus and a programme of revising the machinery risk assessments has been implemented. This has seen a new risk assessment tool introduced and circa 15 – 20 people trained in how to complete one of these assessments

• Junior Management Training – a safety, health & environment module for junior management has been developed for use across the Group. Training under this module has commenced across the Aesica Academy attendees and this will also be rolled out across Bespak in the coming financial year

IMPROVED HEALTH & SAFETYperformance not only aids operational efficiency but also morale and the culture of continuous improvement

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EnvironmentOur policies commit the Group to reducing our environmental footprint and are focused on environmental management, energy reduction, minimisation of waste, diversion of waste from landfill/incineration and water conservation. The Environmental Management System ISO 14001 enables effective management of these impacts. All active Bespak sites, Aesica’s two UK manufacturing sites and Pianezza, Italy are certified to this Standard.

During FY2018 we have continued our investment in environmental compliance as part of our programme of addressing historical environmental permitting compliance issues, particularly at our API facilities. This has involved environmental, health and safety analysis, and the appointment of appropriately qualified environmental consultants to carry out compliance and operability audits, review processes and procedures, and provide ongoing support.

EnergyThe Group’s energy consumption has decreased from 630.5 kWh/£000 of sales in FY2016 to 544.8 kWh/£000 of sales in FY2018. This represents a reduction of 13.6% and therefore exceeds the annual Group reduction target of 5% against the FY2016 baseline. Initiatives which contributed to this reduction include:• The creation of a cross function

Environmental Sustainability team with an initial focus on energy reduction

• The installation of the Biomass Power Station next to the Cramlington site producing a green source of energy for the site from October 2017

• The Pianezza site procures 100% of its electricity from renewable sources and has installed a system that switches off the compressors during weekends

• The Cramlington site is supporting external partners in the development of an innovative industrial heat recovery solution, by hosting a first industrial pilot scale trial at the site

• A “Switch off” campaign has been implemented and signage put in place as a reminder to power down PCs, switch off lights and equipment

• A review of the main production plants (piping systems) at the Cramlington site was carried out using ultrasound measuring equipment. The inspection found a number of leaks of varying intensity that amounted to an energy loss. A programme of repair is under way

• The refurbishments of offices and labs in King’s Lynn and Cambridge have utilised new technologies to reduce energy consumption including enhanced insulation, intelligent LED lighting, and high efficiency air conditioners and heat recovery systems. LED replacement projects have also been initiated at Queenborough, Monheim and Pianezza sites

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WasteIn FY2018 the Group has continued with a broad range of initiatives to reduce waste and as a result we diverted 97.6% of total waste from landfill/incineration. This represents an increase in the diversion rate from the year before and shows evidence of a continued focus on waste segregation across all sites. This has been driven by increased levels of employee engagement and greater levels of individual ownership. We continue to work

towards diverting waste from landfill/incineration with this remaining a key focus area for the Group.

WaterThe Group’s water consumption dropped from 2.00 m³/£000 sales in FY2017 to 1.95 m³/£000 sales in FY2018. The refurbishment of the King’s Lynn Office facility in two buildings has seen the implementation of soft measures to ensure good water usage including dual flush systems, spring loaded taps and more instant hot water

facilities for hot beverages. All these measures have contributed to water consumption savings.

In FY2018 the Pianezza site installed a refrigerant system for the “Pure water” production plant instead of the use of disposable water. Both plants in Cramlington revised the operation of cooling towers where an excessive blowing down of the water and subsequent replacement of fresh water was highlighted and corrected, leading to water consumption savings.

An effluent management project has been launched in Nelson to reduce water consumption. This project is expected to be complete in October 2018.

Greenhouse gas emissionsAs required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, the table below sets out the greenhouse gas emissions from all sources over which we have operational control. Emissions outside of our responsibility, including shared office locations, have not been included.Emissions from: Tonnes of CO2e

FY2018 FY2017 FY2016Base year

FY2015

Scope 1Combustion of fuel 18,699.9 17,711.7 17,959.5 17,468.1Operation of facilities 8,028.2 9,103.4 7,476.2 6,971.6Scope 2Import of electricity and other energy sources 35,848.6 38,003.4 40,427.9 39,528.6Total emissions 62,576.7 64,818.5 65,863.6 63,968.3Intensity ratioPer £’000 sales 0.20 0.22 0.24 0.23Per number of employees 28.9 29.0 28.7 29.2

FY2018 Waste diverted from landfill/incineration vs. landfill%

Total Group Greenhouse Gas Emissionsper £’000 sales

0.20.24

0.22

2016 2017

0.23

2015 2018Waste diverted 97.6%Waste to landfill 2.4%

INVESTMENT IN ENERGYimprovements can provide increased operational efficiency due to enhanced infrastructure.

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OUR VALUES ARE:

Customer Focus: Strive to exceed the expectations of your internal and external customers

Results Driven: Maximise your performance through drive and determination

Teamwork: Work together to achieve a shared objective

Respect: Treat people as you expect to be treated

Integrity: Be clear and consistent in your actions

As a Group, we remain focused on building Our Values based culture with values embedded in our core HR processes. Employees are rewarded and recognised for excelling in the values and we communicate through value boards and posters at all our sites.

Our Values are integral to many of our key people processes including recognition and performance management. In support of helping employees really understand what Our Values mean we solicited feedback from staff representing all sites, functions and levels and prepared examples of positive and negative behavioural traits.

This simple framework helps bring Our Values to life and will be communicated to employees via the employee magazine and also as a part of the launch on our new performance management process – MyGrowth.

Customer Focus

Integrity

Respect

Teamwork

Results Driven

CORPORATE VALUES

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Employees PoliciesThe Group supports the principle of equal opportunities in employment and is committed to developing all staff to their maximum potential. Further details of these policies can be found below and in the Directors’ Report.

The Group remains focused on supporting and developing people through its policies, training and development, communications and two-way engagement channels.

Training and Development We recognise that current and future success is related to our ability to train and retain high quality, skilled employees. Our varied training programmes support this and are detailed below.

In total the Group has delivered 8,000 training days during the year, an increase from the previous year. This shows a strong commitment to developing our people and providing the necessary skills for individuals to excel in their roles.

This training has included subjects such as Internal Auditor, Mental Health Awareness, Mental Health First Aider, Good Manufacturing Practice, Effective Development conversations, Autism Awareness, Root Cause Analysis, Risk Management, Time Management, Presentation Skills, Effective Mentoring, and Master Moulder 1 and 2.

Bespak Moulding AcademyThis year Bespak is establishing the Bespak Moulding Academy, the first of its type in Europe, with the objective to ensure the business continues to build capacity and skills development in this key area of expertise.

Aspire Management Development ProgrammeA number of managers have now completed the Aspire First Line Manager Programme. The objective of this programme is to support the development of key skills in managers as they start their careers managing others. Of those completing the programme the majority have achieved an Institute of Leadership and Management (ILM) level 3 qualification in Management.

Internal Development ProgrammeBespak currently has a number of employees completing specialist internal development. These programmes give employees the opportunity to further develop their skills and knowledge and covers subjects such as plastic injection moulding, engineering toolmaking and engineering maintenance.

Aesica AcademyThe Academy is tailored to high potential future leaders in support of building our talent bench and is accredited to the ILM. In May 2018, 12 colleagues from the current cohort will graduate and we have committed to two additional intakes during FY19. The programme is modular in design and includes commercial, financial and EHS awareness culminating with the completion of an improvement project presented to the Aesica Operating Board.

Basic Leadership Skills A modular skills development programme for first line leaders, is currently active in Cramlington, Queenborough, Monheim and Zwickau and will be launched in Pianezza by autumn 2018. The programme is targeted at equipping our first line supervisors with basic management skills including handling difficult situations, effective recruitment and selection and dealing with recurring sickness absence.

Apprenticeship Scheme The Group currently has 35 apprentices on the Apprenticeship Training Programme. Bespak also offers the Apprenticeship Qualification as an internal development programme, with a further nine individuals provided with the opportunity to grow their skills and knowledge. Bespak has also offered its first degree apprenticeship which is a BSc in Digital and Technology Solutions.

During the year, Bespak has been successful in achieving IMechE (Institute of Mechanical Engineers) accreditation for its Engineering Apprenticeships. This means that anyone completing one of our engineering apprenticeship programmes is able to register as an Engineering Technician. Moreover, Bespak’s apprenticeship scheme is now listed on the EngTech section of the Institute’s website (www.imeche.org).


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AESICASite: Cramlington

Name: Bethany McDonnell

Role: Quality Control Apprentice

APPRENTICESHIP PROGRAMME

Start Date: July 2017

Completion Date: July 2019

BETHANY MCDONNELL

When I first started school we had to write down our goals for the future; mine were “To work with test tubes.” and “Be a scientist.” With hard work, dedication and the right support, I am privileged to be well on the way to achieving my goals at the age of 18.

I started my apprenticeship in July 2017 after the completion of my A levels. During my A levels I decided against going to university and instead started seeking an apprenticeship. In my opinion, apprenticeships offer something that university cannot; you are constantly learning and applying yourself to real life situations.

With an apprenticeship comes responsibility. I have a responsibility to my colleagues, the company, and the customers who need and use our products. It’s great to be part of an extended family here at Aesica Cramlington. There is always support available and people on hand to help one another which makes a great environment for learning. I always feel comfortable asking questions in order to improve my knowledge and have learnt the importance of vigilance and diligence in our day-to-day work. My apprenticeship has given me confidence and proves that hard work pays off.

When I heard I had been successful in securing an apprenticeship with Aesica, I was overwhelmed and delighted to be starting a new chapter in my life. Doing my dream job and doing something I am passionate about. Eight months later, I thoroughly enjoy the challenges and excitement that each day brings. No two days are the same and I thrive on the fast paced environment of the QC labs.

Upon successful completion of my level 3 apprenticeship, I would love to develop within the business, ideally via a higher level, graduate apprenticeship. I believe this will best equip me to reach my full potential within Aesica.

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BESPAKSite: King’s Lynn

Name: Matthew Wolfe

Role: Service Desk Analyst – Applications

DIGITAL & TECHNOLOGY SOLUTIONS PROFESSIONAL – DEGREE APPRENTICESHIP

Start Date: January 2018

Completion Date: September 2021

MATTHEW WOLFE

Matthew completed his Level 3 IT, Web and Telecom Apprenticeship in 2017 he has now moved on to start an apprenticeship that will allow him to graduate with a full BSc (Hons) Degree. Matthew’s words below explain why he has chosen to continue his studying while working at Bespak. “When I came to the end of my apprenticeship, I started to identify further training courses, as I’m keen to continue my learning. I’ve always wanted to complete a degree, and the degree apprenticeship scheme appealed to me. It allows me to continue working in the office environment and gain valuable experience, whilst also having an academic learning environment once a month.”

Feedback from Mark Newman, Head of IS shows how valuable a member of the team Matthew is:

“ Matthew is a key member of the Bespak IS team. During his 3½ years with the team his personal development, skillset, and breadth of technical experience have blossomed. He is valued by all, and interacts politely and effectively with our wide customer base from supporting the Consort Executive team to troubleshooting local IT issues in the cleanroom with the operational team at Bespak. Matthew is a credit to himself and the apprenticeship scheme.”


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Employee diversityWe are committed to actively encouraging a more inclusive and diverse workforce and look for opportunities to embed this where appropriate. We hire on merit but when recruiting externally we aim to include a female candidate on shortlists. The female representation on the Board and across the Group as at the year-end is shown below:

Female Male Total Female % Male %

Board 1 7 8 12.5 87.5Executive 2 4 6 33.3 66.7Management 33 73 106 31.1 68.9Other 762 1,198 1,960 38.9 61.1Overall 798 1,282 2,080 38.3 61.7

During the year we have implemented a formal Equality, Diversity and Inclusion Policy across the Group and are committed to developing a culture that is fair and inclusive. The aims of the Policy are to allow all employees to fully contribute to the business.

In FY2018 the Group has commenced a number of initiatives to promote equality, diversity and inclusion. These include:• The appointment of a Diversity

Champions at King’s Lynn• Number of awareness updates

issued: Ramadan, Women In Engineering, Pride, Islamic New Year, and Hannukah

• Celebration events in particular for Diwali and Thanksgiving

• Registered as a Disability Confident employer – at the same time as we hosted two (autism) placements in the business over six weeks

• Introduced a Quiet Prayer Room at King’s Lynn

Mental Health AwarenessMany colleagues attended Mental Health Awareness training during the year and Mental Health First Aid workshops also ran and Bespak now have ten trained mental health first aiders in the business.

Engagement surveyOur Group engagement survey was conducted in 2016 and gave employees the opportunity to provide feedback on what the Group was doing well and what we could improve. A number of focus groups were established to provide the business with recommendations, which has resulted in the following FY2018 activities:• Family fun days • Enhanced communications: – Employee round-table meetings with Aesica Operating Board members

– Regular Town Hall meetings led by General Managers

– Introduction of in-house magazine to Aesica

– Basic leadership skills development programmes targeted at first line supervisors

– MyGrowth – a new approach to performance management that utilises our OneHR (Oracle) platform to encourage more regular and frequent feedback and eliminates year-end performance ratings (we maintain a pay for performance culture)

• Development of the employee intranet site

• Improvements to the Bespak onboarding process

The next Group-wide engagement survey will be launched in summer 2018.

CommunityWe are committed to supporting the patient population we serve and the communities in which we operate. Both local and national charities are considered important stakeholders for our business and we continue to discuss how we direct our support to make the biggest difference.

WELL TRAINED AND DEVELOPED EMPLOYEESwill be able to support the future innovation and growth of the Group

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Schools, Colleges and UniversitiesWe have a number of active engagement programmes with local schools, colleges and universities. These help to attract local talent and raise the profile of our business within the higher education labour market. This includes offering work experience placements.

As part of our commitment to Diversity & Inclusion, we are incredibly proud to support the National Autistic Society (NAS) with a number of activities. We have partnered with the NAS to deliver valuable training to managers to support their understanding of autism and methods to support employees or individuals with autism and support work experience placements in partnership with the NAS. We offered a work experience placement at King’s Lynn for a school leaver and two work placements for students through the Autism Awareness programme.

Rotary Technology Tournament Bespak supported the Rotary Technology Tournament. This event allows students to take part in a project which requires them to apply their knowledge and skills to a project. A number of Bespak employees attended the event to support the teams as they completed the activity. This provided them the opportunity to coach the students and provide feedback on areas such as initial concept, implementation and how the team worked together.

Grand East Anglia Run (GEAR)During the year Bespak signed a new three year contract to continue sponsoring the GEAR 10K Corporate Team Challenge and Mini GEAR events.

Charitable supportConsort Medical’s charities policy aims to promote education and opportunity and encourage the involvement of employees in community and charitable activities and organisations. Over the past 12 months Consort Medical has supported the Stillbirth and neonatal death charity (SANDS, North Hertfordshire branch) with a donation of £50,000.

In addition to this, the Group also supported, through numerous employee led activities:• The Big C by raising £35,000• Mind, Save the Children,

Macmillan, the Queen Elizabeth Hospital in King’s Lynn, Kinder-Und Jugendhospiz Regenbogenland in Düsseldorf, the Maggie Centre (part of the Freeman Hospital in Newcastle), the Wisdom Hospice and the Red Cross

Ethical standardsWe emphasise the importance of operating a business in both a responsible and ethical manner. Appropriate standards and policies have been created to uphold all laws relevant to prevention of bribery and corruption in all jurisdictions in which we operate. These cover Anti-Corruption and Bribery; Gifts and Hospitality; Business Ethics and Whistleblowing. New data protection policies and procedures in line with the General Data Protection Regulation (GDPR) have been introduced to the business during May 2018.

The Group operates a zero tolerance policy for bribery and corruption of any kind and gives training to all relevant employees via an online training module. During the year this training has been refreshed and made available to the business. Further training on the new Criminal Corporate Offence (Tax Evasion) and GDPR will be rolled out to all relevant employees in FY2019.

The Group recognises that the strength of its business relies heavily on a stable and ethical supply base. To that end we continue to roll out a code of ethical standards to our existing and new suppliers or ensure that an equivalent code is in operation. This standard aims to ensure our entire supply base operate with the highest ethical standards. It ensures our suppliers are compliant with all appropriate laws and regulations, treat their employees with dignity and respect and take active steps to protect against modern slavery. In addition our code of conduct ensures our suppliers are respectful and protective of the environment, are compliant with health and safety laws and regulations at all times and that they do not participate in acts of bribery and corruption. As part of our supplier approval process, all new suppliers are required to adhere to this standard which is available on our website (www.consortmedical.com).

As part of the whistleblowing procedure a confidential and independent hotline service is available to all our employees who can raise concerns about how the Group conducts its business. In FY2018 of the calls received, following investigation, it was established that no calls related to any material concerns or to bribery or corruption matters.


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Human rightsWe are committed to supporting human rights through our compliance with the laws and regulations of the countries where we operate and through our internal policies. Our Code of Business Ethics and associated policies require respect and equal and fair treatment of all persons we come into contact with, in line with our Group values. Currently there is not a separate dedicated Human Rights Policy but this will be kept under review.

Modern Slavery StatementThe Group welcomes and supports the introduction of the Modern Slavery Act 2015. We have taken appropriate steps to ensure slavery and human trafficking are not taking place in our business or supply chain. The Group’s formal Modern Slavery Statement can be found on our website at www.consortmedical.com.

Gender payAt Consort Medical, we want to ensure all employees are rewarded fairly for their work and have the same access to all opportunities. Our Gender Pay Gap report can be found on our website at www.consortmedical.com.

Our Goals for FY2019

HEALTH AND SAFETY ENVIRONMENT EMPLOYEES COMMUNITY ETHICAL STANDARDS

• Less than five RIDDORs across the Group

• Reduce energy consumption (kWh/£’000 sales) across the Group by a further 5% against the FY2016 baseline

• Maintain our progress to divert waste from landfill/incineration

• Manage and reduce our use of water

• Continue to drive a values based culture with an emphasis on safety and compliance

• Drive all engagement activities including launch of MyGrowth (new performance management process)

• Champion inclusion and diversity through the introduction of Diversity champions at all sites

• Strengthen our talent bench with emphasis on development programs

• Provide more opportunities for secondments across the divisions

• Continue with our award-winning apprenticeship scheme and introduction of graduate scheme

• Support the local communities where our sites are based through charity work, education visits and careers fairs

• Continue to support designated charities through donations and employee contribution days

• To maintain high ethical standards across the Group

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BOARD OF DIRECTORS

Dr Peter FellnerCHAIRMAN

Jonathan GlennCHIEF EXECUTIVE OFFICER

Paul HayesCHIEF FINANCIAL OFFICER

Appointed to the Board14 November 2005. Chairman since May 2009

Current RolesDr Fellner is currently Chairman of Vernalis plc and Mereo Biopharma Group plc.

CommitteesPeter is Chairman of the Nomination Committee.

Skills & ExperiencePeter previously served as Chairman of Celltech Group plc from 2003 to July 2004, having been CEO from 1990 onwards. Before joining Celltech he was CEO of Roche UK from 1986 to 1990.

More recently, he has been involved in a wide range of companies. These have included serving as Chairman of Ablynx nv from 2013 to 2018 and Optos plc from 2010 to 2015, until its acquisition by Nikon Corporation. He was also Chairman of Acambis plc from 2006, until its acquisition by Sanofi in 2008, and Chairman of Premier Research Group plc from 2007 to 2008, when it was acquired by a private-equity backed group. In addition, he was Vice Chairman of Astex Pharmaceuticals, Inc. from 2011 to 2013 when it was acquired by Otsuka. He was a Director of the global biopharmaceutical company UCB SA from 2005 to 2014, and also served as a Director of QinetiQ Group plc (2004-2009) and Evotec AG (2005-2011). He was a member of the Novo A/S Advisory Group from 2010 to 2016 and a member of the Medical Research Council from 2000 to 2007.

In summary, Peter has many years’ experience in the pharmaceutical and biotechnology industry including senior R&D, executive and non-executive appointments.

Appointed to the Board11 September 2006. CEO since December 2007

Current RoleChief Executive Officer

CommitteesMr Glenn is a member of the Nomination Committee and the Corporate Responsibility Committee.

Skills & ExperienceJonathan was Group Finance Director of Consort Medical plc from September 2006 until December 2007 when he took up the position of Chief Executive Officer. Prior to joining Consort Medical plc, Jonathan was global Head of Finance at Celltech Group plc and later Chief Financial Officer of Akubio Ltd, a Cambridge-based developer of instrumentation for the life sciences industry. Jonathan joined Tissue Regenix Group plc as a non-executive director in January 2016 and is an investor director of Atlas Genetics Limited.

Jonathan is a member of the Institute of Chartered Accountants in England and Wales.

Appointed to the Board1 May 2017

Current RoleChief Financial Officer

CommitteesMr Hayes attends the Audit Committee at the invitation of the Chairman.

Skills & ExperiencePaul was Group Finance Director of Vitec Group plc, between June 2011 and April 2017. Previously he was Group Financial Controller at Signet Jewelers Limited (formerly Signet Group plc) between 2007 and 2011. Prior to that he held a senior role at RHM plc from 2004 to 2007 through its flotation in 2005 and subsequent sale to Premier Foods plc. Paul was with Smiths Group plc for over ten years from 1993, including a number of divisional and operating company finance director roles.

Paul is an investor director of Oxular Limited.

He is a Chartered Accountant having qualified with Ernst & Young LLP, and has a first class Masters degree in Mechanical Engineering, Manufacture & Management.

consortmedical.com Stock Code: CSRT42

OUR GOVERNANCE

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Ian NicholsonNON-EXECUTIVE DIRECTOR

Charlotta GinmanNON-EXECUTIVE DIRECTOR

Dr William JenkinsNON-EXECUTIVE DIRECTOR

Dr Andrew HostyNON-EXECUTIVE DIRECTOR

Steve CrummettNON-EXECUTIVE DIRECTOR

Appointed to the Board13 June 2012

Current RolesMr Nicholson is Chief Executive Officer of F2G Ltd, a UK-based antifungal drug discovery and development company, Chairman of Bioventix plc, a diagnostics company, non-executive director of Clinigen Group plc, a specialty pharmaceuticals and services business, and also an Operating Partner at Advent Life Sciences LLP.

CommitteesIan is Chair of the Corporate Responsibility Committee and a member of the Remuneration and Nomination Committees.

Skills & ExperienceFrom 2004 to 2012, Ian was Chief Executive of Chroma Therapeutics Limited, and from 2000 to 2004 Senior Vice President, Business Development at Celltech Group plc.In addition to his Chief Executive experience, Ian has extensive experience in business development, licensing and mergers and acquisitions in the UK, Europe and the US.

Appointed to the Board11 February 2015

Current RolesMs Ginman is a non-executive director and Chairman of the Audit Committee for Motif Bio plc, Pacific Assets Trust plc, Polar Capital Technology Trust PLC and Keywords Studios plc. Furthermore, she is a non-executive director for Unicorn AIM VCT plc.

CommitteesCharlotta is a member of the Audit, Remuneration and Nomination Committees.

Skills & ExperienceCharlotta qualified as a Chartered Accountant at Ernst & Young before spending a career in investment banking and commercial organisations, principally in technology-related businesses. Charlotta began her career at Ernst & Young LLP joining in 1989, and then held a series of senior roles in investment banking with UBS, Deutsche Bank and JP Morgan. Charlotta has also held senior roles within Nokia Corp. and Vertu Corp. Ltd.As three out of Charlotta’s six non-executive directorships are with quoted investment companies that involve less time commitment than trading companies, Charlotta is able to devote sufficient time to all of her appointments.

Appointed to the Board6 May 2009. Senior Independent Director since 1 September 2011

Current RolesDr Jenkins is a non-executive director of Ablynx nv and Allecra Therapeutics GmbH. He is also a member of the Scientific Advisory board of BB Biotech Ventures and a member of the Strategic Advisory Board of Chiesi Farmaceutici SpA. He is principal of William Jenkins Pharma Consulting.

CommitteesWilliam is Chair of the Remuneration Committee and a member of the Nomination Committee.

Skills & ExperienceFormerly head of Worldwide Clinical Development and Regulatory Affairs for Novartis Pharma AG and held similar positions with Ciba Geigy AG and Glaxo.

Appointed to the Board14 July 2014

Current RolesDr Hosty is non-executive Chairman of mOm Incubators Ltd. He is also a non-executive director of RHI Magnesita N.V. and Rights and Issues Investment Trust Plc.

CommitteesAndrew is a member of the Audit, Remuneration and Nomination Committees.

Skills & ExperienceBetween 2016 and 2018 Andrew was Chief Executive of the Sir Henry Royce Institute for Advanced Materials and from 2013 until 2016 Andrew was Chief Operating Officer at Morgan Advanced Materials plc. Before this, he held a number of senior positions within Morgan Advanced Materials plc, including as Chief Executive Officer of Morgan Ceramics and joined the Morgan Advanced Materials plc Board in July 2010. Previously he was a non-executive director of Fiberweb plc from 2012 to 2013 and President of the British Ceramics confederation from 2003 to 2005. He is a Fellow of the Royal Academy of Engineering.

Appointed to the Board13 June 2012

Current RoleFinance Director of Morgan Sindall Group plc

CommitteesMr Crummett is Chair of the Audit Committee and a member of the Nomination Committee.

Skills & ExperienceSteve is a Chartered Accountant and was Group Finance Director of Filtrona plc (now Essentra plc) from 2008 to 2012, having previously held senior finance roles with a number of listed companies.

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EXECUTIVE COMMITTEE

Jonathan GlennCHIEF EXECUTIVE OFFICER

Dr Keyvan DjamaraniMANAGING DIRECTOR, BESPAK

Paul HayesCHIEF FINANCIAL OFFICER

Dr Manja BoermanMANAGING DIRECTOR, AESICA

Lisa KingDIRECTOR OF HUMAN RESOURCES

See biographical details on page 42

See biographical details on page 42

Committee MembershipMember of the Corporate Responsibility Committee

Skills & ExperienceLisa was Vice President, Human Resources, UK and Ireland for UCB Pharma (previously Celltech plc) from 2000 to 2008 before being appointed Director of Group Human Resources at Consort Medical in August 2008. Prior to UCB, Lisa held HR roles at Prudential Assurance plc, Hughes Asia Pacific and Rothmans/British American Tobacco plc.

Lisa is a member of the Chartered Institute of Personnel and Development.


Skills & ExperienceKeyvan has over 15 years of experience at Consort Medical, having previously held general management roles at Bespak Europe in the UK and Bespak Inc. in the US as well as a short appointment at Kings Systems Inc. prior to its disposal in 2013. Previously Keyvan held various project and production management roles at Unilever UK’s Detergents & Household Products and Personal Products Divisions.


Skills & ExperiencePrior to joining Aesica, Manja held a number of executive leadership positions as President of Patheon Biologics, President of DSM Biologics, CEO of Kiadis Pharma and CEO of Regenesance. She has also headed up the Biologics business for Charles Rivers Laboratories. Manja started her career at DSM and held multiple business development and licensing and technology roles with DSM Biologics. She has over 15 years’ experience in the biotech and pharmaceutical industry and holds a PhD in Biochemistry from the State University of New York.

Iain LindsayINTERIM GENERAL COUNSEL

Skills & Experience Iain was Senior Vice President and General Counsel EMEA for Sabre Corporation from 2001 to 2017, before joining Consort Medical plc. Prior to Sabre, Iain held legal roles at Hilton plc, DuPont, Ladbroke Group plc and international law firm, Jones Day Gouldens.

Iain is a qualified solicitor. He has sat on a committee established by the Secretary of State for Transport and is currently a trustee of a charitable residential housing association.


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CORPORATE GOVERNANCE

DR PETER FELLNER CHAIRMAN

Dear ShareholdersOn behalf of the Board, I am pleased to present Consort Medical’s Corporate Governance Report for the year ended 30 April 2018.

Governance highlightsThe Board takes governance seriously, recognising that good governance is important to long-term success and having due regard to our stakeholders including our employees, suppliers and the communities in which we operate. During the year, we have reviewed our governance framework through updating the Company’s Articles of Association and the annual review of our Committee’s terms of reference which can be found on the Company’s website. Details of our stakeholder engagement can be found within our corporate responsibility report.

The Board has also approved a formal Group-wide Equality, Diversity and Inclusion Policy which will apply to the Board, as we recognise that diversity in all its forms is key to the successful delivery of our strategy.

Board membership and supportAt the beginning of the year Paul Hayes joined the Board as Chief Financial Officer and I am delighted to say that the Board has worked well as a team throughout the year. This was substantiated by the responses given in our annual Board evaluation review. As required by the Corporate Governance Code, Paul undertook an in-depth induction which has enabled him to effectively contribute to the leadership of the Company. More details on his induction are included in the report that follows.

Although there were no further Board changes in the year, our General Counsel and Company Secretary, John Ilett left the Company in February 2018 to take up a new role. We thank John for his contribution and commitment during his time with the Company and wish him well in his future career. While we are conducting the search for his successor, Paul Hayes is undertaking the role of Company Secretary, supported by Iain Lindsay who has joined as interim General Counsel.

While reviewing succession planning with the Board earlier in the year, I considered that the time was right to develop more detailed plans for my own succession. I have now notified the Board of my intention to step down as Chairman, and the search to appoint my successor has commenced. I am grateful to William Jenkins, our Senior Independent Director, for leading a rigorous process in this regard and I look forward to sharing further details with you as soon as a successor is appointed.

Looking forward, succession planning will continue to be a key area of focus for the Board, to ensure that we have the most appropriate team in place to lead the business. We will also monitor and review our governance framework in light of any revisions to the Corporate Governance Code.

2018 Annual General Meeting (AGM)Our AGM will be held on 5 September 2018 at our registered office, and as always, I look forward to meeting you and answering any questions that you may have.

DR PETER FELLNERCHAIRMAN

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CORPORATE GOVERNANCE CONTINUED

The UK Corporate Governance CodeThe Group is committed to practising good corporate governance of its affairs as part of its management of relationships with its shareholders and other stakeholders. The Group seeks to uphold and to report on compliance in accordance with best practice in corporate governance.

Compliance statementThe directors are satisfied that the Group has complied with the relevant principles and provisions set out in the UK Corporate Governance Code (the “Code”) which was published in April 2016 (available from www.frc.org.uk) as updated and was compliant throughout the financial year under review.

The principles of the Code cover five areas: leadership, effectiveness, accountability, remuneration and relations with shareholders. With the exception of the directors’ remuneration (which is dealt with separately in the Remuneration Report), the following sets out how the Board has applied these principles.

The Board is committed to establishing and maintaining high standards of corporate governance. Its policy is to appoint directors with appropriate skills who have sufficient time to carry out their duties adequately. The Board provides opportunities through site visits and regular access to senior management to permit directors to familiarise themselves with the Company and the markets in which it operates.

LeadershipThe role of the BoardThe Board is responsible for the long-term success of the Company. Individual members of the Board have equal responsibility for the overall stewardship, management and performance of the Group and for the approval of its long-term objectives and strategic plans.

Division of responsibilitiesThere is a clear division of responsibilities between the role of the Chairman and that of the Chief Executive and the roles are clearly set out in writing and regularly reviewed by the Board.

CONSORT MEDICAL BOARDResponsible for the long-term success of the Company

AUDIT COMMITTEEResponsible for reviewing the Group’s financial and reporting practices and

disclosures, reviewing the integrity of the financial

statements, the system of the internal controls, the work of

the external auditor and compliance with financial

policies, laws and regulations

See pages 55 to 57

REMUNERATION COMMITTEE

Responsible for determining the structure, components

and level of the remuneration packages of the Chairman, the executive directors and designated members of the senior management team

See pages 59 to 68

EXECUTIVE COMMITTEEResponsible for operational matters not

reserved for Board decisionsMembers are listed on page 44

NOMINATION COMMITTEE

Responsible for reviewing the membership of the Board

and identifying suitable candidates for appointment

and reappointment as directors together with succession planning at both Board and senior

management levelSee page 51

BESPAK OPERATING BOARD

Responsible for the day-to-day operation and execution of

Bespak’s strategy

AESICA OPERATING BOARD

Responsible for the day-to-day operation and execution of

Aesica’s strategy

CORPORATE RESPONSIBILITY

COMMITTEEResponsible for ensuring

that the Company operates in a responsible manner

accross all aspects of the business

See pages 30 to 41


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Board responsibilities

ROLE NAME RESPONSIBILITY

Chairman Dr Peter FellnerAppointed Chairman on 1 May 2009

• Leadership of the Board • Setting the Board’s agenda, style and tone of

discussions• Ensuring the Board’s effectiveness in all aspects of its

role• Facilitating active engagement by all members• Participating in shareholder communications• Promoting high standards of corporate governance

Chief Executive Jonathan Glenn • Developing Group strategy for consideration and approval by the Board

• Leading the senior management team in delivering the Group’s strategic and day-to-day operational objectives

• Leading and maintaining communications with all stakeholders

Non-executive directors Steve Crummett

Charlotta Ginman

Dr Andrew Hosty

Ian Nicholson

• Constructively challenging and contributing to the development of Group strategy

• Monitoring the integrity of financial information, financial controls and systems of risk management to ensure they are robust

• Reviewing the performance of executive management• Formulating executive director remuneration

Senior Independent Director

Dr William Jenkins

Appointed Senior Independent Director on 1 September 2011

• Acting as an intermediary for other directors when necessary

• Available to meet with shareholders and aid communication of shareholder concerns when normal channels of communication are inappropriate

• Holding meetings with other non-executive directors without the Chairman present to appraise the Chairman’s performance

The non-executive directorsIndependenceThe Board has reviewed the independence of each of the Company’s non-executive directors as part of the annual Board evaluation, including a particularly rigorous review of those serving beyond six years (Dr William Jenkins, Mr Ian Nicholson and Mr Steve Crummett). The Board considers that all of the non-executive directors are independent directors, in both character and judgement, in accordance with the recommendations of the Code. This includes:

• Mr Ian Nicholson, who previously acted as a consultant in addition to his role as a non-executive director. The consultancy role has now ceased. The Board has determined that Mr Nicholson continues to be independent, noting, in particular, his continued substantial contribution to the Board, utilising his extensive business development and acquisition experience to provide independent challenge in all Board discussions

• Dr William Jenkins, who has served the Board since 2009. In light of Dr Jenkins’ length of service, the Board has undertaken a particularly rigorous review of his performance, including his independence, in order to evaluate his contribution to the Board and to the committees on which he sits. Following this review, the Board has concluded that Dr Jenkins continues to be independent, as evidenced by his significant contribution to the Board in his roles as Senior Independent Director and Remuneration Committee Chairman using his extensive pharmaceutical experience and management skills to challenge and guide as appropriate. Dr Jenkins retains his role as Senior Independent Director, and is recommended for re-election by shareholders at the AGM

The Chairman, Dr Peter Fellner, who has now served on the Board for 13 years and has been Chairman of the Board for nine years, was considered independent on his appointment as Chairman.

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The operation of the BoardReserved matters and delegated authoritiesThe Board has the authority for ensuring that the Group is appropriately managed and achieves the strategic objectives it sets. To achieve this, the Board reserves certain matters for its own determination which were revised in March 2018, including matters relating to: • Group strategy• approval of interim and annual financial results• dividend policy• major capital expenditure• treasury policy• risk management• the effectiveness of the systems of internal control• shareholder communications • changes to the Group’s management and

control structure • any business acquisition or disposal • amendments to the structure and capital of

the Group

The full schedule of matters reserved to the Board is published on the Company’s website.

The Board performs its responsibilities through an annual programme of meetings, and by continuous monitoring of the performance of the Group as a whole.

Matters considered by the Board in FY2018 include:• health, safety and well-being• reports from the Chief Executive and CFO on the

Group’s actual and forecasted operational and financial performance

• the annual budget• annual and interim results• new Articles of Association• new Save As You Earn Schemes• the Defined Benefit Pension Scheme

investment strategy• the annual Board evaluation review• renewal of the Group’s insurance programme• presentations from senior divisional management• strategic plans• strategic business opportunities • senior executive recruitment

• dividend declarations and policy• investor relations activities • renewal of Board appointments• approval of Board Committee membership• Modern Slavery statement • appointment of a joint broker• gender pay gap• review and approval of Equality, Diversity and

Inclusion Policy

The Board also delegates a number of its responsibilities to committees and management as described below.

Board meetings and attendance The Board has eight scheduled meetings per year, with other meetings convened for specific matters. The attendance of each of the directors, whether in person or by telephone, at the scheduled Board meetings, is shown below:

NameBoard

meetingsP. Fellner1 8/8W. Jenkins 8/8C. Ginman 8/8S. Crummett 8/8I. Nicholson 8/8A. Hosty 8/8J. Glenn 8/8 P Hayes 8/8

1 As Chairman, Dr Peter Fellner has attended all of the Board’s meetings and continues to commit substantial time to fulfilling his role. His other significant commitments are listed in his biography on page 42.

In addition, the Board held an annual two day Strategy review meeting attended by members of the Executive Committee and senior divisional management team. This included a review of each division’s strategic plans and the consolidated Group strategic plan.

EffectivenessThe Board’s compositionAs at 30 April 2018, the Board of the Company consisted of the non-executive Chairman, two executive directors and five non-executive directors. The profiles of the Board members are set out on pages 42 and 43. No individual or group of individuals dominates the Board’s decision-making process. The non-executive directors occupy, or have occupied, senior positions in industry and together they constitute a valuable body of relevant industry experience and expertise.


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Chair 1Executives 2Non-executive directors 5

The Board has always recognised the importance of diversity and during the year the Board has approved a formal Equality, Diversity and Inclusion Policy which has been implemented across the Group. This sets out our commitment to promoting equality of opportunity and ensures that a range of candidates is taken into account when drawing up long and shortlists throughout the Group.

All aspects of diversity including but not limited to age, gender, marital status, race, disability, nationality, ethnic or national origin, sexual orientation, religious belief or political views are considered at every level of recruitment. All appointments to the Board and elsewhere are made on merit against objective criteria with the principal consideration being whether or not the appointee can add or complement to the existing range of skills and experience.

Although no new appointments were made to the Board during the year, the Board and the Nomination Committee continue to discuss the successional needs of the Board and consider the diversity of its membership in line with the adopted Equality, Diversity and Inclusion Policy.

At the March Board meeting the Board reviewed the results of the Group’s gender pay gap, which are available on the Company’s website.

The Group’s diversity metrics for employees, senior management, the executive and the Board can be found in the Corporate Responsibility Report. Female representation on the Board constitutes 12.5%.

Appointment of non-executive directorsNon-executive directors are appointed to the Board following a formal, rigorous and transparent process, involving external recruitment agencies, to select individuals who have a depth and breadth of relevant experience. This ensures that the selected candidates will be capable of making an effective and relevant contribution to the Board. The process for the appointment of non-executive directors is managed by the Nomination Committee, whose responsibilities are outlined on page 51.

Terms of appointment and time commitmentAll non-executive directors are appointed for an initial term of three years subject to satisfactory performance. After this time they typically may serve additional three-year terms following review by the Board. All non-executive directors are expected to devote such time as is necessary for the proper performance of their duties. Directors are expected to attend all Board meetings and committee meetings of which they are members and any additional meetings as required. Further details of their terms and conditions are summarised in the Remuneration Report and the terms and conditions of appointment of the non-executive directors are available at the Company’s registered office.

Chair 1Executives 2

0-3 years 14-7 years 48+ years 3

Induction and professional developmentUpon joining the Board, newly appointed directors receive a tailored induction comprising site visits, background information on the operation and activities of the Group, the role of the Board and its committees and those matters reserved for the Board’s decision, and the latest financial information on the Group. Training and development needs of directors are reviewed regularly. The directors are kept apprised of developments in legal, regulatory and financial matters affecting the Group from the Chief Financial Officer, the Company Secretary, and the Group’s external auditors and advisers.

Board Composition

Board Tenure

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Information and supportBoard members are provided with all relevant documentation in advance of each Board and committee meeting. Senior executives are invited to attend Board meetings periodically for the purpose of making presentations on their areas of responsibility. During the year presentations were given by the newly appointed Managing Director of Aesica, the Managing Director of Bespak and also by the Aesica Operations Director to ensure that the Board was aware of the division’s operations.

In addition to formal Board meetings, the Chairman and Chief Executive meet frequently and make regular contact with other Board members. The Board and the senior executives meet formally once during each financial year to discuss, debate, review and agree corporate strategy.

Independent professional adviceThe Board has approved a procedure whereby directors may consult the Company’s advisers and, if necessary, take independent professional advice at the Company’s expense, although not in respect of a director’s personal interests. Before seeking advice, the director concerned must notify the Chairman, or in his absence, the Senior Independent Director. No such advice was sought by any director during the year.

Company SecretaryBoard members have access to the Company Secretary, who attends all Board meetings. It is the responsibility of the Company Secretary to ensure effective communication within the Board and committees and between the executive team and the non-executive directors. The appointment and removal of the Company Secretary is subject to the approval of the Board.

Annual Board evaluationThe annual evaluation of the Board was carried out during the year ended 30 April 2018 and the process allowed the Board to assess how effectively it sets the tone from the top. A rigorous and formal review required completion of a questionnaire relating to the performance of the Board and its committees and with regard to compliance with the Code. The evaluation was wide-ranging and focused on the various aspects of the Code. The results of the questionnaire were reported to the Board in a manner that did not identify any individual responses. The evaluation concluded that there were no areas of significant weakness and that overall the Board, its committees and individual directors were operating effectively.

Election and re-election of directorsThe Company’s Articles of Association require all directors to retire and submit themselves for re-election at the first AGM after appointment and thereafter at least every three years. The Notice of AGM will give details of those directors seeking re-election.

Meetings of non-executive directorsLed by the Senior Independent Director, the non-executive directors meet informally, without the Chairman being present, principally to appraise the Chairman’s performance and to review his remuneration. The Chairman holds meetings at least annually with the non-executive directors without the executive directors present.

Board committeesThe Board has the three principal committees listed below. The current terms of reference of each committee may be obtained from the Company’s website.

Name: Paul Hayes

Role: Chief Financial Officer

During the year we welcomed Paul Hayes to the Board. A detailed induction took place to ensure that Paul had a thorough understanding of the Group, its businesses and operations. It comprised a governance information pack which includes Group policies, structure charts, matters reserved for the Board, committee Terms of Reference and the Company’s Share Dealing Policy. Face-to-face meetings with members of the senior management team and employees to understand the culture, values, and strategy of the Company and meetings with shareholders and advisers to gain an understanding of investor concerns and market issues. He also undertook site visits to gain further knowledge of the Group’s operations.

PAUL HAYES INDUCTION CASE STUDY


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Remuneration CommitteeDuring the year, members of the Remuneration Committee were:

Dr William Jenkins (Chairman) Steve Crummett (until April 2018) Dr Andrew Hosty Charlotta Ginman (with effect from April 2018) Ian Nicholson (with effect from April 2018)

The Chairman is invited to attend all meetings, but does not attend any part of any meeting at which his own terms of appointment are discussed. The Chief Executive attends by invitation where appropriate except where his own remuneration is being considered.

The Remuneration Committee is primarily responsible for determining the structure, components (including pension rights and compensation payments) and level of the remuneration packages of the Chairman, the executive directors and designated members of the senior management team. Details of the role of the Remuneration Committee are set out on page 67. The Remuneration Committee met four times during the year and members’ attendance at the meetings is shown below:

Name

Remuneration Committee

meetingsW. Jenkins 4/4S. Crummett1 3/4A. Hosty 4/4C. Ginman2 1/4I. Nicholson2 1/4

1 Mr Crummett attended all meetings up to his resignation from the Remuneration Committee.

2 Ms Ginman and Mr Nicholson have attended all meetings since their appointment to the Remuneration Committee.

The activities of the Committee during the year are set out in the separate Remuneration Report on pages 59 to 68.

Nomination CommitteeDuring the year, members of the Nomination Committee were: Dr Peter Fellner (Chairman) Steve CrummettCharlotta GinmanJonathan GlennDr Andrew HostyDr William Jenkins Ian Nicholson

The Nomination Committee is primarily responsible for reviewing the membership of the Board and identifying suitable candidates for appointment and reappointment as directors. In addition, the Board has delegated responsibility to the Nomination Committee for succession planning both at Board and senior management level. The inclusion of the Chief Executive in the membership of the Nomination Committee ensures that a balanced view is taken regarding the needs of the Group as a whole.

The Committee ensures that the search for Board members is undertaken against objective criteria and with due regard to the benefits of diversity, including gender. Appointments continue to be made on merit, taking into account the importance of maintaining a balance of skills, experience, independence and knowledge.

During the year the Nomination Committee considered the appointment process for the Group General Counsel and Company Secretary. Using the services of Spencer Stuart, a number of potential candidates were identified for the position and we are delighted that Andrew Jackson will be joining the Company in early September. In addition, the Committee has received an update on senior management talent and succession planning for both the Board and the senior management team.

The focus for the forthcoming year will be the search for a new Chairman and, in due course, succession planning for the Senior Independent Director. Dr Fellner has indicated his intention to stand down and Dr Jenkins completed nine years of service on the Board in May 2018. In light of Dr Jenkins’ performance and that, as the Senior Independent Director, he has been asked to lead the search for a Chairman Designate, the Board has recommended that Dr Jenkins’ tenure should be extended by one year and accordingly, he will stand for re-election by shareholders at the AGM in September. To assist with the Chairman’s appointment process the Company has engaged Ridgeway Partners.

Neither Spencer Stuart nor Ridgeway Partners have any other connection with the Company.

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The Committee’s main activities during the year were:• A review of the Board and committee membership• Succession planning• Overseeing the process and appointment of the

General Counsel

The Nomination Committee met twice during the year and members’ attendance is shown below:

Name

Nomination Committee

MeetingsP. Fellner 2/2S. Crummett 2/2C. Ginman 2/2J. Glenn 2/2A. Hosty 2/2W. Jenkins 2/2I. Nicholson 2/2

Audit CommitteeThe Audit Committee is comprised entirely of independent non-executive directors. Members during the year were:

Steve Crummett (Chairman) Charlotta Ginman Dr Andrew Hosty

Both Steve Crummett and Charlotta Ginman are considered by the Board to have recent and relevant financial experience. Both are qualified Chartered Accountants.

The external auditor’s lead partner and the Chief Financial Officer attend each meeting as requested by the Committee. The Chief Executive attends the interim and year end meetings.

The Audit Committee met three times during the year. At each meeting the members of the Committee took the opportunity of meeting the external auditor without management being present. Members’ attendance at the meetings is shown below:

Name

AuditCommittee

meetings

S. Crummett 3/3C. Ginman 3/3A. Hosty 3/3

The activities of the Committee during the year are set out in the separate Audit Committee Report on pages 55 to 57.

Other committeesThe Executive CommitteeThis Committee is responsible for the executive management of the Group. It comprises the Chief Executive, the Chief Financial Officer, the Group General Counsel, the Managing Director of Bespak, the Managing Director of Aesica and the Director of Human Resources. This Committee currently meets eight times during the year to review and make decisions on operational matters not reserved for Board decisions.

The Corporate Responsibility CommitteeThe Corporate Responsibility Committee is responsible for reviewing and prioritising the Group’s corporate responsibility activities, further details of which can be found in the Corporate Responsibility review on pages 30 to 41 of this report. The Committee is chaired by non-executive director, Ian Nicholson. Other members include the Chief Executive, the Managing Director and Operations Director of Bespak, the Managing Director and Quality Director of Aesica, and the Director of Human Resources. The Company Secretary acts as secretary to the Committee.

Risk CommitteeThe role and responsibilities of the Risk Committee are outlined in the Risk management section.


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AccountabilityRisk managementThe Board accepts responsibility for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives.

Further information on how we manage our business risks is set out in the Risk section on pages 26 to 29, which contains a list of the principal risks and uncertainties.

Internal controls reviewThe Board acknowledges that it is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute assurance, against material misstatement or loss. The Board has received regular reports on areas of any significant risk and on the related internal controls. The Board reviews the framework of internal controls annually and has reviewed the effectiveness of its internal systems of control as they have been operated within the year in accordance with relevant guidance. This system has been in place for the year under review and up to the date of approval of the Annual Report and Accounts.

The review covers all material controls including financial and financial reporting processes, operational, compliance and risk management systems. Controls over the financial reporting process and preparation of the consolidated accounts consist of extensive reviews by qualified and experienced individuals that ensure that all elements of the financial statements and appropriate disclosure are considered and accurately stated.

Control proceduresAnnual budgets are prepared by each of the operating divisions of the Group and these are consolidated into an overall Group budget, which is reviewed and approved by the Board. Progress against these budgets is monitored at operating business and Group level throughout the year via monthly reporting of actual financial performance against both budget and prior period. The Executive Committee also reviews the key measures of operating performance.

The Group has clear authority limits deriving from the list of matters reserved for decision by the Board, including capital expenditure approval procedures.

Viability statementIn accordance with provision C2.2 of the Code, the directors have assessed the viability of the Company over the three-year period to 30 April 2021. The directors have determined that a three-year period constitutes an appropriate period over which to provide its Viability statement as this is the period focused on during the strategic planning process (see Risk management section above) and is appropriate for the Group’s business cycle. The Group’s strategic plan considers the Group’s results, cash flows, debt and other key financial ratios over the three-year period.

The viability assessment takes into account the Group’s current position, its future prospects, the strategic plan, the Group’s principal risks and the mitigating actions to address these as set out on pages 26 to 29. Stress testing has been carried out by determining the impact of each of the principal risks on the Group’s results, borrowing facilities and covenant commitments. This stress testing also considered severe but plausible scenarios which illustrate the potential impact of a combination of these risks crystallising during the period. A number of reasonable assumptions are included within these assessments including:• that funding facilities will continue to be available

and that the facility which expires in September 2019 will be renewed on a broadly similar basis;

• that in the event of several risks occurring simultaneously and having a severe impact on the Group, all potential mitigating actions including adjusting capital management to preserve cash would be taken on a timely basis; and

• that implausible scenarios where multiple risks occur all at the same time, or are unable to be appropriately mitigated, do not occur.

The Board has concluded that the Group has adequate resilience due to its diversified product portfolio and product development portfolio expertise, regulatory expertise, a strong balance sheet, healthy cash generation and access to external financing, which includes committed facilities.

Therefore the directors have a reasonable expectation that the Company and Group will be able to continue in operation and to meet their liabilities as they fall due over the three-year period of assessment to 30 April 2021.

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Financial reportingThe directors’ responsibility for preparing the accounts is set out in the Statement of Directors’ Responsibilities on page 85.

Going concernAfter making enquiries, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operation for the foreseeable future and to meet their obligations as they fall due. As at 30 April 2018, the Group reported net debt of £95.5m (2017: £92.6m), which compared with total committed banking facilities of £168.6m (at year end exchange rates) leaving £51.3m of headroom undrawn. The Group’s primary committed financing facility is available to September 2019. Accordingly these financial statements have been prepared on a going concern basis.

RemunerationOur Remuneration Report, which describes the level and components of the remuneration of the directors, is set out on pages 59 to 68.

Relations with shareholdersThe Board regards relationships with shareholders as very important and it aims to encourage open dialogue with them through regular meetings with the Group’s institutional shareholders, including meetings following the announcement of the Company’s interim and annual results and at other times with institutional investors and other shareholders at their request. Shareholders may meet with any new non-executive director if they wish. The Chairman ensures that views expressed at these meetings are reported to the Board as a whole. The Company’s brokers also attend Board meetings at the request of the Chairman to provide feedback on shareholder opinion.

Presentations given to analysts are available on the Company’s website.

The Senior Independent Director is available to meet with shareholders as required.

Shareholder meeting – the Annual General Meeting (AGM)All shareholders have the opportunity of discussing the Group’s performance and development at its AGM, which provides a forum for shareholders to raise issues with the Board. Members of the Remuneration, Nomination, Audit and Corporate Responsibility Committees will also be available at the AGM so that shareholders may discuss any queries they may have.

Our previous AGM was held on 6 September 2017 and the full voting results on each of the resolutions are published on our website. Our 2018 AGM will be held on 5 September 2018 at the Company’s registered office in Hemel Hempstead. The Notice of the Meeting sets out each of the resolutions to be proposed and a copy of the Notice can be downloaded from the Company’s website at www.consortmedical.com.


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Chairman’s introductionAs Audit Committee Chair, I am pleased to present the Audit Committee’s report for the year ended 30 April 2018. This report details the work of the Committee over the past year, fulfilling our responsibilities to provide effective governance over the Group’s financial activities. Our role is to assist the Board in carrying out its oversight responsibilities in relation to financial reporting, internal controls and risk management, as well as maintaining an appropriate relationship with the external auditor.

The Committee met three times during the year, and discussions included the following key items:• risk assurance• treasury, including foreign currency hedging• accounting policies• financial results • carrying value of Goodwill• Alternative performance measures and the

treatment of Special items• Revenue recognition • engagement and review of external auditor• review of audit and non-audit services and fees• review of reimbursed expenses• Audit Committee terms of reference• cyber risk, data protection and disaster

recovery procedures• taxation, including the published Tax Strategy• Going concern review• Viability review• pensions• Whistleblowing policy

Key developments in accounting, corporate reporting and taxationThe Audit Committee is responsible for reviewing, on behalf of the Board, the Group’s financial and reporting practices and disclosures, reviewing the integrity of the financial statements, the Group’s system of internal controls, the work of the external auditors and the Group’s compliance with financial policies, laws and regulations. The Audit Committee’s terms of reference may be obtained from the Company’s website.

The annual and half-yearly financial reports are reviewed by the Committee through a process which includes discussion with the Chief Financial Officer and the external auditors. The external auditors prepare reports to the Committee on significant accounting policies and issues and judgements applied in the preparation of the financial reports. The Audit Committee gives its recommendation to the Board concerning the adoption and publication of all financial reports to shareholders.

In addition to the Board, the Audit Committee has conducted its annual review of the system of internal controls based on a review of significant risks identified, internal reviews, external audits and reports from management.

Viability reviewWe provided support to the Board with regard to the 2016 Corporate Governance Code, including assessment of risk appetite and the statement on the Group’s viability. We reviewed the longer term assessment of the viability of the Group, including its financial and operational position and the potential impact of the principal risks and uncertainties. The Viability statement is included on page 53 of the Corporate Governance Report.

AUDIT COMMITTEE REPORT

STEVE CRUMMETT CHAIRMAN OF THE AUDIT COMMITTEE

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AUDIT COMMITTEE REPORT CONTINUED

Financial reporting and significant financial mattersIn carrying out its duties, the Committee is required to assess whether suitable accounting policies have been adopted and to challenge the robustness of significant management judgements reflected in the financial results. This process involves reviewing relevant papers prepared by management in support of the policies adopted and judgements made. These papers are discussed with management and the external auditors. In addition, the Committee reviews the year end report to the Audit Committee from the external auditors based upon its work performed and findings from the annual audit.

The Committee reviews and considers pre issuance the Group’s financial statements, being the 2018 Annual Report and the half year results to 31 October 2017, with particular reference to the statements being fair, balanced and understandable.

During the year, the Committee considered the following key financial and internal control matters in relation to the Group’s financial statements and disclosures, with input from management and the external auditor. The significant accounting issues considered by the Committee during the year were areas where management was required to use significant judgement. These issues are listed below:

Carrying value of GoodwillThe value of goodwill is supported by a value in use model prepared by management. This is based on cash flows extracted from the Group’s budget and strategic plan, which have both been approved by the Board. The Committee debated the performance of the operating segments, considered the cash flow models in the Group’s strategic plan, and evaluated sensitivities in relation to that plan. The Committee concurred with management’s conclusion that the carrying value of goodwill was fully supported.

Alternative performance measures and the treatment of Special items and their presentation in the consolidated financial statementsSpecial items have been separately disclosed within the Group’s consolidated financial statements. The Committee has reviewed papers prepared by management showing how these costs have been identified and calculated. It has challenged both the quantum of the charge and its presentation in the consolidated income statement and is satisfied that these costs have been treated appropriately. The Committee specifically evaluated the appropriateness of the treatment of those items relating to the Aesica acquisition and considered the adequacy of the related disclosures.

Revenue recognitionThe Group’s policy for revenue recognition is set out in note 1 to the financial statements. Management prepares a paper for the Committee setting out any key judgements applied in respect of revenue recognition and in the accounting for major manufacturing contracts or material amendments to contracts where significant judgements have been applied. The Committee has reviewed the papers presented and challenged management on the judgements applied, ensuring they are in line with the Group’s policy.

Auditor independence and effectivenessThe Audit Committee last conducted a tender process in 2015 and KPMG LLP was subsequently appointed as the Group’s auditor in November 2015.

The Committee had discussions with the external auditor on audit planning, fees, accounting policies, audit findings and internal control. The external auditor attended all of this year’s Committee meetings. The Committee assessed the effectiveness of the external audit through the review of audit plans, reports and conclusions and through discussions with management (both with and without the external auditor present) and the external auditor (both with and without management present). The Committee was satisfied that the audit was effective. In addition, the Chairman of the Audit Committee meets with the audit partner outside formal meetings. The Committee is satisfied that KPMG continued to possess the skills and experience required to fulfil its duties effectively and efficiently during the financial year.

Auditor performanceThe Committee undertakes a comprehensive assessment of auditor performance following the year-end audit, scoring their performance and effectiveness and including taking on board feedback from management. The Committee was satisfied with the auditor’s performance in respect of the external audit and review undertaken in respect of the financial year ended 30 April 2018.


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Non-audit servicesIn accordance with its policy on non-audit services provided by the Company’s auditor, the Committee reviews and approves the award of any such work. The Audit Committee refers to the Board for approval of any non-audit services where the fees for such work may represent a significant proportion of the annual audit fee.

The following non-audit services were provided by KPMG LLP during the year: • An agreed upon procedures engagement delivering

an auditor’s certificate as required for a RGF EU grant claim for safeguarding jobs at Cramlington

KPMG LLP have confirmed they have applied appropriate safeguards in respect of any threat to their independence and objectively arising from the provision of the above non-audit services.

Details of non-audit services provided to the Company by the external auditor are shown in note 3 to the financial statements.

Internal auditThe Audit Committee has from time to time considered the requirement for a separate dedicated internal audit function and determined that the scale and nature of the Group’s operations are sufficiently large and complex that such a dedicated resource is required. A dedicated Group resource is in place which continues to support internal audit activities. This is being supplemented as and where appropriate through the engagement of internal audit services from suitably qualified external providers. The Audit Committee keeps this under review.

WhistleblowingDuring the year, the Audit Committee reviewed and approved the internal procedures whereby employees can raise concerns about possible financial or other irregularities. The Whistleblowing (Public Disclosure) policy gives guidance on the type of matters that staff may wish to disclose, and a means of doing so via an independent organisation in the event that any staff member feels that he or she cannot make a disclosure via the usual management channels.

The Group is committed to the highest standards of openness, integrity and accountability and the prevention of bribery and corruption. As noted above, the Group operates a whistleblowing policy so that employees can report confidentially any matter giving rise to concerns about the operation of the Group’s business.

STEVE CRUMMETTCHAIRMAN OF THE AUDIT COMMITTEE

13 June 2018

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Dear Shareholders,On behalf of the Board, I am pleased to present Consort Medical’s FY2018 Directors’ Remuneration Report.

Business performanceConsort has delivered another year of good growth with revenue up 5.8%. Group profit before tax and special items also increased by 7.3% to £38.2m; this represents growth of 70% over the last three years.

Bespak has continued to grow its respiratory business while making significant progress on its innovative Syrina® / VapourSoft® auto-injectors. Aesica is growing sales and margins supported by new API, finished dose and packaging contracts in a streamlined business structure.

Consort strategy is well established and the business has now delivered sustained strong performance over a multi-year period. The Board is confident of Consort’s future prospects supported by a robust financial position and a strong development pipeline.

Remuneration outcomesFor the annual incentives, the profit outcome was towards the top end of the stretching target range set at the start of the year and both executive directors performed strongly against strategic objectives. In the context of a good year of profit growth, the annual incentives outcome for FY2018 was 89% of maximum for the CEO and 93% of maximum for the CFO.

Over the last three years, EPS has grown by 35%. This financial and operating performance has also been reflected in the Company’s Total Shareholder Return performance with the Company once again delivering significant returns to our shareholders over the last three years. The performance period for the long-term share award granted in 2015 will end shortly after this report is finalised, however the current expectation is that this award will vest towards the upper end of the vesting range.

In the context of the financial and operating performance that has been sustained over the longer-term, and good returns for our shareholders, the Remuneration Committee is comfortable that the incentive outcomes are fully merited.

For the year ahead, salaries for executive directors will be increased by 2.5% with effect from August 2018, which is in line with increases to other employees in the wider Group.

Renewal of the Remuneration PolicyThe previous Remuneration Policy was approved by shareholders at the 2015 AGM. This policy received strong shareholder support when adopted and the overall structure continues to be in line with mainstream FTSE practices.

Under the UK regulations, the Company is required to seek re-approval for the Remuneration Policy at least once every three years, and subsequently an updated Policy will be presented to shareholders at the 2018 AGM.

The overall structure of pay under the new Remuneration Policy will remain broadly unchanged, however the Committee has taken the opportunity to make some minor changes to reflect evolving market and best practice. The key points to note are:• No increases to the maximum award levels under the

policy – proposed award levels for the coming year are also unchanged

• Simplification of the annual incentives – previously the Company operated separate “cash” and “share” bonus schemes. In line with market practice, in future years the Company will operate a single annual bonus, with a fixed proportion deferred into shares

• Addition of two-year holding period for future PSP awards – this is in line with best practice

In respect of the annual incentive structure, the change is largely presentational as the maximum opportunity, balance of measures, and mix of cash and shares is broadly unchanged from prior years. However, the Committee is of the view that the new structure provides better transparency for both shareholders and participants, and is more in line with standard market practice.

Looking aheadThe Committee has been kept informed regarding potential changes to both reporting requirements and the corporate governance framework applicable to FTSE-listed companies in future years. Once any new guidance is published, the Remuneration Committee will give further consideration on how the changes will impact our approach to executive remuneration as we seek to comply with any new rules.

Further details regarding our approach to pay is set out in the main body of the Remuneration Report. We welcome the feedback of our shareholders and look forward to receiving your support at the 2018 AGM.

DR WILLIAM JENKINSCHAIRMAN OF THE REMUNERATION COMMITTEE

13 June 2018

REMUNERATION COMMITTEECHAIRMAN’S LETTER

Dr William JenkinsNON-EXECUTIVE DIRECTOR


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The following report summarises how the Remuneration Policy was applied in FY2018 and how the Committee intends to apply the policy for FY2019. The report will be subject to an advisory vote at the AGM in September 2018.

How the Remuneration Policy was implemented for executive directors in FY2018The following information is audited.

Single total figure of remuneration The following table sets out the single figure for total remuneration for executive directors for the FY2017 and FY2018 financial years:

Salary £’000

Benefits£’000

Bonus £’000

LTIP £’000

Pension £’000

Total £’000

Jonathan Glenn FY2018 493 15 659 5592 99 1,825FY2017 481 16 569 6493 96 1,811

Paul Hayes1 FY2018 320 14 329 – 56 719FY2017 – – – – – –

1 Paul Hayes joined the Company on 1 May 2017, therefore FY2018 is the first year in which he was remunerated.2 These awards are due to vest in June 2018 after the finalisation of this report. The shares estimated to vest have been valued based on the

latest vesting forecasts, accrued dividends on shares and using the average share price during the final quarter of the financial year of £11.59.3 Valued using the share price on the date of vesting of £10.76. This award vested in full.

Notes to the tableThe following paragraphs set out details of how the numbers included in the single figure table above have been prepared.

Base salary With effect from 1 August 2017, salaries for Jonathan Glenn (CEO) and Paul Hayes (CFO) were £496,350 and £320,000 respectively.

BenefitsBenefits include a car allowance, life assurance, private medical insurance and personal health insurance. The CEO also receives a fuel card.

Annual bonus For FY2018 the annual bonus opportunity for the CEO and CFO was split between cash and deferred shares, as set out in the table below.

Cash element – maximum opportunity

(% of salary)

Deferred share element – maximum opportunity

(% of salary)CEO 100% 50%CFO 75% 35%

As in prior years, 80% of the cash element of the annual bonus was based on the reported underlying Profit Before Tax (“underlying PBT”) performance for the financial year. The remaining 20% of the cash element and 100% of the deferred share element was based on the Committee’s assessment of individual performance against strategically important goals at a corporate and personal level.

ANNUAL REMUNERATION REPORT

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ANNUAL REMUNERATION REPORT CONTINUED

In addition, for the deferred share element, the following PBT hurdles needed to be achieved before shares were awarded.

Profit before taxBelow

£32.9mAt

£32.9mBelow

£36.6mEqual to or above

£36.6m

Maximum deferred shares vesting (based on achievement of strategic targets)

No deferredshares may

be awarded

CEO – up to 7% of salary

CFO – Up to 5% of salary





This combination of financial performance and strategic measures ensures that the overall level of bonus paid is appropriate and reflective of the Company’s performance during the year.

As the underlying PBT was above the target of £36.6m, the deferred share element award will be up to a maximum up to 50% of salary for the CEO and up to 35% of salary for the CFO, as adjusted by the personal factors percentage set out below.

The table below shows the underlying PBT performance required.

25% of element

80% of element

100% of element

FY2018 performance

Outcome – % of max

Underlying PBT £32.9m £36.6m £38.4m £38.2m97% of

element

For FY2018, the factors considered when assessing performance against objectives set for the CEO and CFO at the start of the year included the following:

OBJECTIVE OVERVIEW OF PERFORMANCE

CEO Enhancement of key customer relationships

• Managed relationships with key customers, to ensure the development programme timetable remains on track

• Outperformance on specific objectives that were set

Collaboration between Bespak and Aesica

• Objective was to advance the collaborative Bespak / Aesica pipeline to include at least one or more combined programmes this year

• A number of opportunities are currently under discussion with potential customers

Mylan facility – fully operational • Ensured the Mylan facility was fully operational to support the launch of generic Advair

Consider strategic investments • Continued to identify and evaluate potential acquisitions and investments that will generate long-term shareholder value

People • Focus on enhancing the leadership teams and upskilling senior talent • Key roles were successfully identified and recruited during the period


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OBJECTIVE OVERVIEW OF PERFORMANCE

CFO Increase focus on cash generation

• Cash generated from operations was £37.1m for FY18 and the Group balance sheet remains strong as demonstrated by Net debt to EBITDA of 1.7x

• These factors strengthen the Group’s ability for future investment

Finance function review • Successful ongoing development of the finance function driving performance whilst maintaining controls and risk management

Strategy execution and investor engagement

• Key role played in execution of various Group-wide strategic goals• Lead role taken on management of investor and analyst relations and

communication of strategy and results

Internal controls • Review undertaken of all internal controls across the Group. Steps were taken to strengthen both controls and risk management processes

Taking into account the above factors, the Committee determined that the personal portion of the cash element should pay out at 80% of maximum for the CEO and 75% of maximum for the CFO. With regards to the deferred share element, awards of 80% of maximum for the CEO, and 95% of maximum for the CFO were approved.

The total bonuses awarded to the CEO and CFO were therefore as follows:

Role

Total bonus£’000

Cash element

£’000

Deferred share element

(deferred until June 2021)

£’000

CEO 659 (89% of max) 462 197CFO 329 (93% of max) 222 107

Long-term incentives – 2015 Awards vesting based on performance to FY2018 Performance Share Plan (“PSP”) awards granted in 2015 were subject to Total Shareholder Return (“TSR”) compared to the FTSE SmallCap excluding investment trusts and finance, property and insurance companies (50% of the award) and Earnings Per Share (“EPS”) performance (50% of the award). The performance schedule was as follows:

TSR

Vesting(% of

element)Less than the mean annualised comparator TSR 0%Equal to the mean annualised comparator TSR 25%TSR greater than the lower of:(i) mean annualised comparator TSR +7%; or (ii) upper quartile annualised comparator TSR 100%

Note that this is the final award which applies to this vesting schedule. For awards granted from 2016, threshold vesting requires median performance with full vesting requiring upper quartile, which is more in line with conventional market practice.

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EPS (aggregate over the three-year performance period)

Vesting(% of

element)Less than 153p 0%153p 25%177p 100%

Cumulative EPS performance delivered over the period was 187.2p, which exceeds the stretch hurdle required for full vesting and therefore 100% of the EPS element is expected to vest. As the performance period for the TSR element runs until 18 June 2018, the final level of vesting has not yet been determined. However, based on annualised TSR performance to date of c. 10% p.a., c. 85% of the TSR element is expected to vest.

The final vesting outcome will be confirmed following the assessment of actual TSR performance at the end of the performance period. Given the strong performance of the business, as demonstrated by both the growth in EPS and share price performance over the period, the Committee is comfortable that a vesting level towards the upper end of the scale is fully warranted.

For the purpose of the single figure table, the value of the awards have been estimated based on overall vesting of 92.5% of maximum and the three-month average share price during the final quarter of the financial year (£11.59). The final vesting outcomes will be confirmed following the end of the performance period and suitably disclosed in due course.

Share awards granted during FY2018 The table below sets out details of the share awards made to the executive directors during FY2018. Details of the award levels and related vesting criteria for both the PSP and Deferred share awards were disclosed in last year’s Annual Report on Remuneration.

Face value2,3 Performance periodType of award1 Date of grant (£) (% of salary) TSR EPS

Jonathan Glenn PSP4 20 June 2017 484,258 100%20 June 2017

to 19 June 20201 May 2017

to 30 April 2020Deferred

shares5 20 June 2017 168,447 35% n/a n/a

Paul Hayes PSP4 20 June 2017 319,993 100%20 June 2017

to 19 June 20201 May 2017

to 30 April 2020

1 All awards are granted in the form of nil cost options.2 Details of the number of shares granted are set out on page 65. Dividend equivalents may also accrue in respect of awards which

subsequently vest. 3 The face value of PSP awards and deferred shares is calculated using the average price of the three days prior to the date of grant of £10.67

(15 June (£10.18), 16 June (£11.06) and 19 June (£10.76)).4 PSP awards will vest in June 2020 subject to the satisfaction of performance criteria. Awards are 50% subject to TSR performance compared

to the FTSE SmallCap, excluding investment trusts, finance, property and insurance companies; and 50% subject to EPS performance. For threshold performance, 25% of the award may vest.

5 Deferred Share awards are not subject to any further performance conditions and vest in June 2020.


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How the Remuneration Policy will be applied to executive directors in FY2019 (unaudited)Salary & Benefits In the context of another strong year of performance, salaries for all employees within the Group will be increased by a total spend of 2.5% and it is expected that the same increase will apply to executive directors with effect from 1 August 2018. The CEO’s salary will therefore be £508,760 and the CFO’s salary will be £328,000.

Benefits for FY2019 will remain unchanged.

Annual bonus The maximum opportunities (as a percentage of base salary) for the executive directors are 150% for the CEO and 110% for the CFO. These remain unchanged from the prior year.

As noted in the statement from the Committee Chair, the presentation of the bonus structure has been simplified for FY2019. Instead of the award being split into two separate awards, a single combined annual bonus will be operated, with one-third deferred into shares. The proportion of the maximum delivered in cash and shares remains broadly unchanged from previous years.

The performance metrics will be as follows:• 60% will be based on underlying PBT (before special

items) and 40% will be based on the Committee’s assessment of performance against the Group’s strategic goals, tailored by individual. Awards will be subject to an underpin based on underlying PBT (before special items). Compared to prior years, there has been a small increase to the proportion of the award based on underlying PBT (from just below 55%, to 60% for FY2019)

• The strategic measures for the bonus have been selected on the basis that they represent areas that are important for the long-term success of the Group

The Committee considers that this combination of measures provides an appropriate balance of focus on improving financial performance and wider business strategic goals. The Committee considers that the bonus strengthens the alignment between shareholders’ and executive directors’ interests, and encourages a longer-term focus on shareholder value, by requiring a three-year deferral of one-third of the annual bonus which is payable in shares.

Note: The performance targets for the FY2019 annual bonus have not been disclosed on a prospective basis as they are considered by the Board to be commercially sensitive as they could reveal details of our budgeting and our strategic goals to competitors. The Committee will seek to provide expanded retrospective disclosure in due course.

Long-term incentives – Performance Share PlanAwards to executive directors will remain unchanged at 100% of salary. The awards will continue to be subject to TSR performance (50%) and EPS performance (50%). For 2018 grants, awards will be subject to a two-year holding period.

TSR will be measured against the TSR performance compared to the FTSE SmallCap, excluding investment trusts, finance, property and insurance companies.

Consort’s relative TSR performance – over three years following grant date

Vesting (% of

element)Less than median TSR of the Comparator Group 0%Equal to median TSR of the Comparator Group 25%Equal to upper quartile TSR of the Comparator Group 100%

EPS will continue to be measured on a cumulative basis. The targets for 2018 awards are:

Cumulative EPS between 1 May 2018 to 30 April 2021

Vesting (% of

element)Less than 207p 0%207p 25%235p 100%

The Committee believes this combination of measures continues to provide an appropriate balance between measuring performance against the Company’s peers and incentivising management to grow earnings for shareholders over the long term.

Exceptionally, the Committee may make adjustments to the calculation of performance measures (e.g. following a transaction or for currency movements) to ensure performance is measured on a fair and consistent basis.

ClawbackIn line with best practice, variable incentives are subject to malus and clawback provisions, as described in the Directors’ Remuneration Policy Report.

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External appointments With the specific approval of the Board in each case, executive directors may accept external appointments as non-executive directors of other companies. The directors are entitled to keep the fees from external appointments.

During the year, Jonathan Glenn undertook the role of non-executive director for Tissue Regenix Group PLC and his fees for the year to 30 April 2018 were £30,000.

Statement of directors’ shareholdings and share interests (audited section)Executive directors are expected to accumulate and maintain a significant shareholding. The vesting of awards from the Company’s various equity-related incentive arrangements can provide a means to develop this shareholding. Only ordinary shares that are beneficially held by the executive director (or their spouses, civil partners, children and stepchildren, as applicable) count towards the shareholding guideline.

The CEO and CFO are expected to accumulate shares worth 200% and 100% of salary respectively over a period of five years. The CEO has met his shareholding guideline. The CFO was appointed in 2017 and will therefore be expected to build his holding over the course of his tenure.

Number of shares counting towards

shareholding guidelines

(as at 30 April)

Value of shares counting towards

shareholding guidelines1

Shareholding guideline

Jonathan Glenn 152,673 £1,832,076 200% of base salary369% of salary

Paul Hayes 8,118 £97,416 100% of base salary30% of salary

1 Calculated based on the share price on 30 April 2018 of £12.00.

The beneficial interests of the executive directors on 30 April 2018 (including beneficial interests of their spouses, civil partners, children and stepchildren, as applicable) in the ordinary shares of the Company are shown below:

Shares Long-term incentives1 SAYE2 Deferred bonus shares3 Total2018 2017 2018 2017 2018 2017 2018 2017 2018

Jonathan Glenn 152,673 151,167 143,184 154,524 1,853 2,172 56,534 57,080 354,244Paul Hayes 8,118 – 29,990 – – – – – 38,108

1 PSP awards and awards under the Company’s previous long-term incentive plan (the LTIP) are structured as nil-cost options and remain subject to performance conditions.

2 SAYE is the Company’s Save As You Earn employee share option scheme. These options are not subject to performance conditions. This is an all-employee share scheme governed by specific tax legislation.

3 Deferred bonus shares are subject to continued employment only.

Between 30 April 2018 and 13 June 2018 Jonathan Glenn and Paul Hayes acquired 25 and 26 partnership shares respectively through payroll deductions under the all-employee Share Incentive Plan. There were no other changes in share interests.


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Scheme interestsThe table below provides details of outstanding awards under share incentive plans:

Date of grant

Plan shares at 01/05/17

Awardedduring

period1

Exercisedduringperiod

Lapsedduringperiod

Total plan shares

held at 30/04/182

Market price

at date of grant (£)3

Earliest date of

exercise

Latest date of

exerciseJonathan GlennLTIP/PSP

20 Jun 2014 56,725 3,551 (60,276) – – 8.97 Jun 17 Jul 1719 Jun 20154 49,308 – – – 49,308 9.26 Jun 18 Jun 2821 Jun 2016 48,491 – – – 48,491 9.74 Jun 19 Jun 2920 Jun 2017 – 45,385 – – 45,385 10.67 Jun 20 Jun 27

Deferred Bonus Plan20 Jun 2014 16,333 1,040 (17,373) – – 8.97 Jun 17 Jul 1719 Jun 2015 22,581 – – – 22,581 9.26 Jun 18 Jul 1821 Jun 2016 18,166 – – – 18,166 9.74 Jun 19 Jul 1920 Jun 2017 – 15,787 – – 15,787 10.67 Jun 20 Jul 20

Paul HayesPSP

20 Jun 2017 – 29,990 – – 29,990 10.67 Jun 20 Jun 27

1 For awards granted in prior years, this relates to dividend equivalent shares. 2 None of the plan shares held at the year-end have vested as at 14 June 2018. 3 Calculated using the three-day average share price prior to the date of grant. 4 2015 awards were originally granted in June 2015 under the terms of the 2005 LTIP. Following shareholder approval of the 2015 PSP, they

were replaced with equivalent awards under the new plan. The PSP awards are over the same number of shares and subject to the same performance conditions as the original LTIP awards. The share price is therefore the three-day average prior to the original date of grant (19 June 2015). Further details are provided in the FY2016 Directors’ Remuneration Report.

At 30 April 2018, there were 300,579 shares in the Company’s share ownership trust (2017: 298,888).

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Further disclosures – in line with the relevant regulations, the following information is unauditedChange in remuneration of the CEO between FY2017 and FY2018 The table below illustrates the percentage change in salary, benefits and annual bonus for the CEO compared to other Group employees (including other senior executives) between FY2017 and FY2018 on a consistent basis.

% change in salary

% change in benefits

% change in annual

bonusCEO 2.5% (2.5)% 14%All Group employees 3.6% 3.5% 7.4%

Historic TSR performance and the remuneration outcomes for the CEOThe graph compares the TSR (based on a notional investment of £100) of Consort Medical against the FTSE Healthcare Sector and the FTSE SmallCap for an eight-year period, calculated on a spot basis. The FTSE Healthcare Sector has been chosen due to sector relevance, while the FTSE SmallCap has been chosen so as to provide a wider market comparator constituting companies of an appropriate size.

The table below illustrates the CEO single figure for total remuneration, annual bonus payout and LTIP vesting as a percentage of maximum opportunity for the same eight-year period.

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018CEO single figure of remuneration (£’000s) 872 1,041 1,861 1,619 1,910 1,816 1,811 1,825Annual bonus payout (% of maximum) 79% 96% 83% 67% 98% 82% 79% 89%Long-term incentive vesting (% of maximum) 0% 0% 100% 100% 92% 100% 100% 92.5%

Relative importance of spend on pay The table below illustrates the year-on-year change in total remuneration compared to distributions to shareholders and profit before tax for FY2018 and FY2017.

Distributions to shareholders

Total employee

payUnderlying

PBT FY2018 (£m) 10.1 93.8 38.2FY2017 (£m) 9.6 85.0 35.6% change 5.2% 10.4% 7.3%

Total employee pay includes wages and salaries, social security costs, pension costs and share-based payments for employees. Further details are provided in note 4 to the accounts on page 112.

2016201420132012201120102009 2017 20182015£0

£100

£200

£300

£400

£500

Consort Medical FTSE SmallCap

FTSE Healthcare Sector


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During FY2018, distributions to shareholders included a dividend of £6.5m paid on 27 October 2017 and £3.6m paid on 16 February 2018.

In FY2017, distributions to shareholders included a dividend of £6.1m paid on 21 October 2016 and £3.5m paid on 17 February 2017. It is proposed that a dividend of 13.56p per share be paid on 26 October 2018. Further details are provided in note 12 to the accounts on page 118.

Underlying PBT has been shown in the table above as it forms the basis on which 80% of the cash element of the bonus is calculated.

Non-executive director letters of appointment (unaudited)The following table provides details of the non-executive directors’ service contracts:

Name

Effective date of

appointmentExpiry of

appointmentDr Peter Fellner 14 November 2005 14 November 2018Dr William Jenkins 6 May 2009 5 May 2019Steve Crummett 13 June 2012 12 June 2021Ian Nicholson 13 June 2012 12 June 2021Dr Andrew Hosty 14 July 2014 13 July 2020Charlotta Ginman 11 February 2015 10 February 2021

Remuneration of non-executive directors (audited)Fees paid to non-executive directors in FY2018The following table sets out the single figure of remuneration for non-executive directors for FY2017 and FY2018:

Fees paid in respect of

FY2018£

Fees paid in respect of

FY2017£

Dr Peter Fellner (Chairman) 138,333 130,000Dr William Jenkins 56,417 53,500Steve Crummett 48,917 46,000Ian Nicholson 46,417 43,500Dr Andrew Hosty 41,417 38,500Charlotta Ginman 41,417 38,500

The fees for the Chairman and non-executive directors were last increased effective 1 July 2017. Full details were provided in last year’s Remuneration Report.

Shares held by non-executive directors at 30 April 2018 (audited) Non-executive directors are not paid in shares nor are there formal shareholding guidelines; however, they are encouraged to hold shares in the Company.

The beneficial interests of non-executive directors on 30 April 2018 (including the benefits interests of their spouses, civil partners, children and stepchildren, as applicable) in the ordinary shares of the Company are shown below:

Shares owned outright at

30 April 2018

Shares owned outright at

30 April 2017

Dr Peter Fellner (Chairman) 6,500 6,500Dr William Jenkins 1,625 1,625Steve Crummett 1,000 1,000Ian Nicholson 1,000 1,000Dr Andrew Hosty 1,579 1,579Charlotta Ginman 948 948

There have been no changes in share interests between 30 April 2018 and 13 June 2018.

None of the directors had a material interest at any time during FY2018 in any contract of significance, other than a service contract, with the Company or any of its subsidiaries.

The Remuneration Committee roleThe Remuneration Committee’s principal role is to determine and make recommendations to the Board regarding the policy for the remuneration of the Chairman, the CEO, the executive directors, the Company Secretary and other members of the senior executive management of the Group. It also determines the policy for, and scope of, pension arrangements and approves the design of performance-related pay schemes, sets the targets for such schemes, and approves payments under such schemes.

The Committee reviews the design of all share incentive plans for the approval of the Board and the shareholders. It determines each year whether awards will be made and, if so, the overall amount of such awards, the individual awards to be made to executive directors and other senior executives, and the performance targets to be used. The terms of reference of the Remuneration Committee are published on the Company’s website.

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Activities during the yearThe Remuneration Committee met four times during the year. Details of attendance at the meetings are shown in the table on page 51. The key matters discussed at these meetings included:

• remuneration of executive directors and senior executives;

• determining bonus payouts and setting bonus targets;

• determining PSP award vesting and consideration of PSP performance criteria;

• granting of share awards and setting performance targets for awards;

• Corporate Governance updates;• Remuneration Committee terms of reference; and• Directors’ Remuneration Report including review of

Remuneration Policy.In discussing the above matters, the Remuneration Committee considered the remuneration policies of the Company as a whole.

MembersThe Remuneration Committee comprises the following independent non-executive directors:

NameDr William Jenkins Chairman (since 1 March 2013)Steve Crummett Member (since 6 November 2012

until Feb 2018)1

Dr Andrew Hosty Member (since 14 July 2014)Charlotta Ginman Member (since 25 April 2018)Ian Nicholson Member (since 25 April 2018)

1 Steve Crummett attended the February 2018 meeting and stepped down prior to the April 2018 meeting.

AdvisersThe Chairman, the CEO, the Director of Human Resources, and the Company Secretary were invited to attend some or all of the meetings to provide advice to the Committee. They did not attend when any matter related to their own remuneration was discussed.

During the period, the Committee received advice from its independent remuneration advisers, Deloitte LLP (“Deloitte”). Deloitte were appointed by the Committee. The Remuneration Committee considers that the advice provided by Deloitte is objective and independent. Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code in relation to executive remuneration consulting in the UK. The Committee is comfortable that the Deloitte engagement team that provide remuneration advice to the Committee do not have connections with Consort Medical that may impair their independence.

Separate teams within Deloitte also provided the Company with advice on the valuation of share awards for IFRS 2 purposes and in connection with the Company’s risks and controls. Total fees for advice provided to the Committee during the year under review amounted to £29,400.

The Committee also received advice in relation to its share schemes from the Company’s lawyers, Ashurst LLP and Pinsent Mason LLP.

Shareholder votingThe table below sets out the results of the most recent votes on the Remuneration Policy and Annual Remuneration Report:

Remuneration policy

(vote on3 September 2015)

AnnualRemuneration

Report(vote on 6

September 2017)Votes % Votes %

Votes in favour 38,315,706 94.93 38,621,619 99.50Votes against 2,046,915 5.07 192,915 0.50Total votes 40,362,621 100.00 38,814,534 100.00Votes withheld 1,444,464 900,963

The Annual Remuneration Report was approved by the Board and signed on its behalf.

DR WILLIAM JENKINSCHAIRMAN OF THE REMUNERATION COMMITTEE

13 June 2018


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The following sets out our Directors’ Remuneration Policy (the “Policy”). This Policy will be subject to a binding vote at the 2018 AGM. If approved by shareholders, this Policy will come into effect following the AGM.

Changes implemented since the previous policyThe previous Remuneration Policy was adopted at the AGM in 2015, and received strong support from our shareholders. The Remuneration Committee have concluded that the overall structure of the previous policy continues to successfully support the business and aligns with mainstream FTSE practices. Therefore, while the Remuneration Policy is being renewed under the normal three-year renewal cycle, the general structure of remuneration will remain unchanged under the new Policy.

As part of our review, minor amendments have been made to the detail of the Policy to reflect evolving market and best practice. Most notably, the structure of the annual bonus has been simplified (but with no changes to the maximum annual bonus opportunity nor the mix of cash and deferred shares) and a holding period will apply to any future LTIP awards.

Consort Medical plc’s executive remuneration principles Our key priorities are to provide remuneration packages for executive directors which:

• are sufficiently attractive to enable the Company to recruit and retain talented individuals with the necessary skills and expertise to support the development of Consort Medical and grow long-term value for our shareholders;

• contain levels of performance-related variable pay such that they are aligned with the long-term interests of our shareholders; and

• provide appropriate motivation for executives to execute the strategy agreed by the Board and to develop and grow the Company and shareholder value, while taking account of internal and external risks.

The following outlines the Company’s Remuneration Policy, which the Committee believes achieves this objective.

The key features are:

• providing a remuneration opportunity that is market competitive compared to relevant peers reflecting individuals’ experience, performance and responsibilities;

• operating an annual bonus, with a long-term deferred share element to align interests with shareholders over the longer term, where annual performance targets are aligned with business strategy and financial performance;

• offering participation in a long-term incentive plan which rewards executives for delivering shareholder value creation and achievement of long-term objectives; and

• expecting executive directors to build up and maintain a holding of Company shares, thus promoting alignment of directors’ interests with those of shareholders.

DIRECTORS’ REMUNERATION POLICY

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PURPOSE AND LINK TO STRATEGY

OPERATION MAXIMUM OPPORTUNITY PERFORMANCE MEASURES

BASE SALARY

The core element of a competitive remuneration package

The Committee sets base salary taking into account:

• the individual’s experience, responsibility and performance;

• salary levels at relevant comparators and at companies of a similar size and complexity; and

• remuneration of different groups of employees within the Company.

Base salary is normally reviewed annually with changes effective from 1 August, although salaries may be reviewed more frequently or at different times of the year if the Committee determines that this is appropriate (e.g. role change).

Where appropriate, it is the policy of the Committee to pay upper quartile base salaries where the incumbent is of a proven calibre, along with demonstrable and sustained success in the role.

In determining salary increases the Committee considers the factors outlined in the “operation” section. While there is no maximum salary level, salary increases will normally be in line with the typical level of increase awarded to other employees in the Group.

However, the Committee retains the discretion to make increases above this level in certain circumstances, for example, but not limited to: an increase in the individual’s scope of responsibilities; in the case of new executive directors who are positioned on a lower initial salary while they gain experience in the role; where the Company has significantly increased in size or complexity; or where the Committee considers that the current salary does not reflect the Company’s policy of upper quartile salary positioning for experienced executives.

Salaries with effect from 1 August 2018 are:

CEO (Jonathan Glenn) – £508,760

CFO (Paul Hayes) – £328,000

None

DIRECTORS’ REMUNERATION POLICY CONTINUED


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ANNUAL BONUS

To motivate and reward superior performance measured against annual financial, strategic and operational goals of the Company which reflect critical success factors.

A portion of the annual bonus is deferred into shares, which ensures that part of the value of payments earned remains tied to the Company’s share price, thus embedding long-term alignment with the interests of our shareholders within the annual bonus plan.

The Committee determines the maximum incentive opportunity taking into account the responsibilities of the role and market practice at comparable companies.

Performance is assessed over a financial year.

The Committee determines the level of annual bonus paid at its discretion taking into account performance against targets, the underlying performance of the business and executive directors’ management of, and performance in, all of the business issues that arose during the year.

The annual bonus incorporates malus and clawback provisions. Further details are set out below.

Normally one-third of any annual bonus will be deferred into shares, for three years from the date of award. The Committee may vary the deferral terms in appropriate circumstances.

The vesting of the shares will normally be subject to continued employment.

Dividend equivalents may be awarded in respect of any vested shares. Dividend equivalents may be determined by the Committee on a cumulative basis and may assume reinvestment of dividends in the Company’s shares.

CEO – Maximum opportunity of up to 150% of base salary

CFO – Maximum opportunity of up to 110% of base salary

Up to 25% of maximum may be payable for achievement of entry levels of performance, with the full incentive being paid for delivering maximum levels of performance.

Annual bonuses may be based on a combination of financial, operational, strategic and individual goals. The Committee will determine the detail of metrics, weightings, and targets based on the Group’s strategic priorities. The Committee sets targets each year to ensure that they are appropriately stretching in the context of the business plan.

In any year, financial performance metrics will always account for at least 50% of the maximum bonus.

The strategic measures are assessed each year and represent areas that are important for the long-term success of the Company, including but not limited to matters such as growth, new value creation, broadening the depth and range of products portfolios, innovation and diversification into adjacent markets while keeping a tight control on costs.

For FY2019, the annual bonus will be based on profit (60%) and strategic and individual (40%) measures.

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PERFORMANCE SHARE PLAN (PSP)

To reinforce the alignment of the interests of executive directors and shareholders.

To motivate long-term business performance and shareholder value creation.

To help retain our critical executive talent.

Award of shares which normally vest based on performance over a period of three years or such other period as the Committee may determine.

Under the PSP rules, awards may be granted in the form of a nil-cost option (or economic equivalent) subject to performance conditions as determined by the Committee.

The Committee may grant awards as “Approved PSP” awards (granting a PSP award in conjunction with a tax advantaged Company Share Option Plan award) to enable the director and the Company to benefit from HMRC-approved tax treatment on part of their award without increasing the pre-tax value delivered to participants. When a director has been granted an option under the Company Share Option Plan 2010, a director may at the same time receive an award of a set value of shares to fund the exercise price for that option or the value of an award on vesting may be reduced if the HMRC tax advantaged option is exercised.

The Committee shall determine the extent to which the performance measures have been met, which may include making adjustments to the metrics used to assess the performance conditions to reflect any relevant factors.

Dividend equivalents may be awarded. Dividend equivalents may be determined by the Committee on a cumulative basis and may assume reinvestment of dividends in the Company’s shares.

The PSP incorporates malus and clawback provisions. Further details are set out below.

As set out in the recruitment policy below, the 2015 PSP may be used to grant buyout awards.

Awards granted to Executive Directors in 2018 and future years will normally be subject to a two-year holding period following the end of the performance period.

Under the plan rules, approved by shareholders in 2015, awards can be made up to 150% of salary.

For FY2019, awards for the CEO and CFO will continue to be up to 100% of salary.

In future years, where the Committee determines there are circumstances which merit varying current award levels, the Committee would appropriately consult with shareholders.

Any shares subject to an HMRC-approved option do not count towards these limits.

Awards currently vest based on relative total shareholder return and earnings performance measures. These measures will normally be equally weighted but the Committee may determine that an alternative weighting is appropriate. It is currently envisaged that each measure will have no less than a 25% weighting.

For threshold levels of performance, up to 25% of the award vests, increasing to 100% of the award for maximum performance. There is straight-line vesting of awards between these points.

The Committee determines performance criteria each year to ensure that targets are stretching and contribute towards value creation for shareholders while remaining motivational for management. Where appropriate, alternative metrics may be used for future awards to ensure they remain aligned with the corporate strategy.

If events happen which cause the Committee to consider that a performance condition has become unfair or impractical, it may amend that performance condition provided that the amended performance condition is not materially less difficult to satisfy.


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PENSION

Part of a competitive package by providing a retirement benefit.

The Company may provide executive directors with a pension benefit through participation in the Group Personal Pension Plan and/or a taxable cash payment.

The Committee may determine that alternative pension provisions will operate for new appointments to the Board. When determining pension arrangements for new appointments, the Board will give regard to the cost of the arrangements, market practice and the pension arrangements received elsewhere in the Group.

The Company’s maximum contribution/cash supplement for the executive directors is as follows:

CEO – 20% of base salary

CFO – 17.5% of base salary

None

BENEFITS

Part of a competitive package.

Benefit policy is to provide an appropriate level of benefit, taking into account market practice at similar sized companies and the level of benefits provided for other employees in the Group.

Core benefits – Currently include car allowance, fuel card, life assurance, private medical insurance (for the executive and his family) and personal permanent health insurance.

All-employee share plans – Executives are eligible to participate in the Company’s all-employee share schemes on the same terms as UK colleagues up to HMRC-approved limits. The Company currently operates the Savings Related Share Option Plan and Share Incentive Plan.

Relocation policy – In the event that an executive were required to relocate from their home location to undertake their role, the Committee may provide an additional reasonable level of benefits to reflect the relevant circumstances (on a one-off or ongoing basis).

Benefits are reviewed by the Committee in the context of market practice and practice throughout the Company from time to time and the Committee may introduce or remove particular benefits if it is considered appropriate to do so.

The cost of benefit provision will depend on the cost to the Company of providing individual items and the individual’s circumstances and therefore there is no maximum value.

None

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SHARE OWNERSHIP GUIDELINES

To increase alignment between executives and shareholders.

Executive directors are expected to build and maintain a holding of shares in the Company. The guideline is normally expected to be built up over the course of their tenure.

The minimum share ownership guideline is equivalent to two times base salary for the CEO and one times base salary for the CFO.

Further detailThe Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment. Awards granted under the Company’s share plans will be operated in accordance with the relevant plan rules. The Committee may adjust awards only in accordance with the provisions of the relevant plan rules. This includes making adjustments to awards to reflect one-off corporate events, such as a change in the Group’s capital structure. Where possible under the plan rules, awards may be settled in cash rather than shares, where the Committee considers this appropriate.

The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed: (i) before 4 September 2014 (the date the Company’s first directors’ remuneration policy approved by shareholders came into effect); (ii) before the policy set out above came into effect, provided that the terms of the payment were consistent with the directors’ remuneration policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a director of the Company and, in the opinion of the Remuneration Committee, the payment was not in consideration for the individual becoming a director of the Company. For these purposes, “payments” includes the Remuneration Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are “agreed” at the time the award is granted.

In respect of variable pay arrangements, the Committee may exercise independent judgement to adjust or vary any performance condition, target, or outcome (upwards or downwards) in certain circumstances, to ensure the incentive arrangements achieve their intended aims. Any such adjustments would be fully explained to shareholders with appropriate disclosure in subsequent Directors’ Remuneration Reports.

Malus and clawbackThe annual bonus and Performance Share Plan incorporate malus and clawback provisions.

For annual bonuses granted in respect of FY2016 and subsequent years, in the event of (i) a material misstatement in Consort Medical’s financial results; or (ii) serious reputational damage to the Company, the Committee may:

• apply malus to reduce an award before the award is paid to the participant; or

• clawback payments for up to two years following the end of the relevant performance period.

For long-term incentive awards granted from FY2016 onwards, in the event of (i) a material misstatement in Consort Medical’s financial results; or (ii) serious reputational damage to the Company, the Committee may:

• apply malus to an unvested award; or• clawback a vested or exercised award or equivalent

value at any time prior to the fifth anniversary grant.


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Selection of performance measuresAnnual bonuses may be based on a combination of financial, operational, strategic and individual goals. The Committee will determine the detail of metrics, weightings, and targets based on the Group’s strategic priorities. The Committee sets targets each year to ensure that they are appropriately stretching in the context of the business plan.

For FY2019, the annual bonus will be based on profit (60%) and strategic and individual (40%) measures.

The strategic measures are assessed each year and represent areas that are important for the long-term success of the Company, including but not limited to matters such as growth, new value creation, broadening the depth and range of products portfolios, innovation and diversification into adjacent markets while keeping a tight control on costs.

Since 2013, the long-term share awards have been based on total shareholder return and earnings performance. Total shareholder return measures share price improvement and dividend returns and therefore is a direct measure of the value we have generated for shareholders compared to the wider market. The earnings measures incentivise management to grow earnings for shareholders over the long-term.

Remuneration arrangements throughout the GroupThe Committee generally considers pay and employment conditions elsewhere in the Group when considering pay for executive directors and senior management. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to other employees in the Group.

When assessing remuneration, the Committee takes care to ensure that individuals are not overpaid in relation to their roles and responsibilities, and that packages for senior individuals are appropriate in comparison to the remuneration of other employees within the Company. Remuneration policy throughout the organisation is based on the same principles – that reward should be sufficient to retain and motivate individuals of a sufficient calibre without paying more than is necessary and should encourage individuals to deliver their own objectives and ultimately create value for shareholders. At Consort Medical, our employees have a variety of different roles and responsibilities and therefore the reward opportunity and structure of rewards is necessarily different to reflect this.

Managers across the Group participate in the annual bonus plan with the most senior and key employees participating in the same PSP as the executive directors. Senior executives who are members of the Group Executive Committee participate in the same reward structure as the executive directors. The majority of employees are eligible to earn an annual bonus each year based on their site-specific performance. We also offer employees the opportunity to save and buy shares through the Sharesave Plan, thus giving them the opportunity to be shareholders.

Considering employee viewsThe Committee generally considers pay and employment conditions elsewhere in the Group when considering pay for executive directors and senior management. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to other employees in the Group.

The Committee does not consult directly with employees regarding executive directors’ remuneration. However, the Company regularly conducts surveys of the views of employees in respect of their experience of working at Consort Medical, including their own rewards. The Committee will remain mindful of changes to the UK Corporate Governance Code when reviewing how employees’ views are taken into account in future years.

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Remuneration policy for non-executive directorsThe Board is responsible for determining the policy on remuneration of non-executive directors. Non-executive directors do not vote on their own remuneration. The Company aims to attract non-executive directors who, through their experience, can further the interests of the Company and make an effective contribution to its strategic development.

APPROACH TO SETTING FEES BASIS OF FEES OTHER ITEMS

The fees of the non-executive directors are agreed by the Board.

The fee for the Chairman is agreed by the Committee.

Total fees are subject to the limits as set out in the Articles of Association.

Fees are normally reviewed every two years but may be reviewed more or less frequently if it is considered appropriate.

Fees are set taking into account the level of responsibility, relevant experience and specialist knowledge of each non-executive director and fees at other companies of a similar size and complexity.

Non-executive directors are paid a basic fee for membership of the Board with additional fees being paid for being the Senior Independent Director or Chairman of a Board committee to take into account the additional responsibilities and workload. Additional fees may also be paid for other Board responsibilities or roles if this is considered appropriate.

The non-executive Chairman receives an all-inclusive fee for the role.

Fees are normally paid in cash.

Annual bonuses or share-based incentives are not awarded to non-executive directors, but they are encouraged to hold shares in the Company.

Non-executive directors do not currently receive any benefits. However, benefits may be provided where appropriate.

Travel and other reasonable expenses (including fees incurred in obtaining professional advice in the furtherance of their duties and any associated taxes) incurred in the course of performing their duties are reimbursed to non-executive directors.

Non-executive directors are included on the directors’ and officers’ indemnity insurance.

The non-executive directors have appointment letters, the terms of which recognise that their appointments are subject to the Company’s Articles of Association and their services are at the direction of the shareholders.

Currently, all non-executive directors submit themselves for election at the AGM following their appointment and at subsequent intervals of no more than three years. This approach will be kept under review in light of any changes to the UK Corporate Governance Code which are announced in due course.

Non-executive directors are not entitled to any payment in lieu of notice. The letters of appointment are available for shareholders to view from the Company Secretary upon request.

Remuneration policy for new hiresWhen determining the remuneration package for a newly appointed executive director, the Committee would seek to apply the following principles: • The package should be market competitive to

facilitate the recruitment of individuals of sufficient calibre to lead the business. At the same time, the Committee would intend to pay no more than it believes is necessary to secure the required talent

• The structure of the ongoing remuneration package would normally include the components set out in the policy table for executive directors

• The Committee has discretion to include any other remuneration component or award which it feels is appropriate, taking into account the specific commercial circumstances, and subject to the limit on variable remuneration set out below. The key terms and rationale for any such component would be appropriately disclosed


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• Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result of appointment, the Committee may offer compensatory payments or awards, in such form as the Committee considers appropriate, taking into account all relevant factors including the form of awards, expected value and vesting time frame of forfeited opportunities. When determining such “buy-out” the guiding principle would be that awards would generally be on a “like-for-like” basis, where appropriate

• Consistent with the policy table, the maximum level of variable remuneration which may be awarded (excluding any compensatory payments or awards referred to above) is 300% of salary (this reflects the current maximum bonus opportunity for the CEO and a maximum PSP award)

• Where an executive director is required to relocate from their home location to take up their role, the Committee may provide reasonable assistance with relocation (either via one-off or ongoing payments or benefits)

• In the event that an internal candidate is promoted to the Board, legacy terms and conditions would normally be honoured, including pension entitlements and any outstanding incentive awards

To facilitate buy-out awards outlined above, in the event of recruitment, the Committee may grant awards to a new executive director under Listing Rule 9.4.2 which allows for the granting of awards, to facilitate, in unusual circumstances, the recruitment of an executive director, without seeking prior shareholder approval or under any other appropriate Company incentive plan (including the 2015 Performance Share Plan).

The remuneration package for a newly appointed non-executive director would normally be in line with the structure set out in the policy table for non-executive directors. Remuneration for newly appointed non-executive directors may be paid in the form of cash or shares.

Remuneration outcomes in different performance scenariosThe remuneration package at Consort Medical is structured so that the majority of the package is related to the delivery of performance over the short and long term to ensure that reward is aligned with shareholder value creation.

The charts below show hypothetical values of the remuneration package for executive directors under three assumed performance scenarios.

CEO CFO

Maximum award opportunities percentage of salary

Annual bonus 150% 110%

PSP 100% 100%

Minimum No annual incentive pay-outNo vesting under the PSP

Mid performance

50% annual incentive pay out (75% of salary for the CEO, 55% of salary for the CFO)25% vesting under the PSP (25% of salary)

Maximum performance

100% annual incentive pay out (150% of salary for the CEO, 110% of salary for the CFO)100% vesting under the PSP (100% of salary)

0-3 years 1

Max

Mid

Minimum

4-7 years 4

33%

55%

40% 27% £1,898k

£626k

34% 11% £1,135k

100%

Fixed pay Annual bonus PSP

Max

Mid

Minimum

37%

60%

33% 30% £1,088k

£399k

27% 12% £662k

100%

CEO CFO

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Salary £’000

(with effect from 1 August 2018)

Benefits£’000

(paid in FY2018)

Pension £’000

(based on salary with effect from

1 August 2018)Total fixed pay

£’000

CEO (Jonathan Glenn) 509 15 102 626CFO (Paul Hayes) 328 14 57 399

Executive director service contracts and policy on payment for loss of officeWhen determining leaving arrangements for an executive director, the Committee takes into account any contractual agreements including the provisions of any incentive arrangements, typical market practice and the performance and conduct of the individual.

The service agreements are available to shareholders to view on request from the Company Secretary.

NOTICE PERIOD Executive directors have service contracts with the Company which can be terminated on 12 months’ notice by the Company and six months’ notice by the executive directors.

Jonathan Glenn was appointed on 26 July 2006 and Paul Hayes was appointed on 1 May 2017.

PAYMENT IN LIEU OF NOTICE

The Company may at its discretion terminate any executive director’s contract by making a payment in lieu of notice equal to the base salary, and benefits which would have been received during the notice period. Current CEO is also entitled to an amount in respect of bonus for their notice period (or remainder of the notice period). The Committee has the discretion to determine the level of such bonus. Previously, when directors have left the business the Committee determined that no bonus should be due for the notice period. The Committee’s policy going forward (which is the approach adopted for the current CFO) is that when new contracts are agreed with new executive directors, any entitlement to bonus as part of any payment in lieu of notice will be removed. Executive directors are also entitled to a payment in respect of any accrued but untaken holiday at the time of termination of employment.

ANNUAL BONUSES The executive director may, at the discretion of the Committee, remain eligible to receive an annual bonus for the financial year in which they ceased employment. Such annual bonuses will be determined by the Committee taking into account time in employment and performance.

2010 DEFERRED BONUS PLAN

Death

Awards shall vest at the time of death and, where awards are in the form of options, they may be exercised for a period of 12 months from death.

“Good leaver” by reason of injury, ill health or disability, redundancy, retirement, or the company for which the participant works leaves the Group and any other reasons determined by the Committee

Awards shall vest in full on the normal vesting date unless the Committee determines that awards should vest on the individual’s cessation of employment. Where awards are in the form of nil-cost options they may be exercised during the normal exercise window or, where the Committee has determined that awards should vest on the participant’s date of cessation of employment, for a period of six months from cessation of employment.

“Good leaver” by reason of the participant’s employing business leaving the Group

Awards will vest in full at the time of the business leaving the Group. Awards in the form of options may be exercised for up to six months from the relevant business leaving the Group.

Leavers in other circumstances

Awards will normally lapse.


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2015 PERFORMANCE SHARE PLAN

Death

Awards shall vest to the extent to which any performance condition has been met, and, unless the Committee determines otherwise, shall be prorated for the period of time that has elapsed since the award was granted until the date of death.

A participant’s personal representatives have until 12 months from the date of death to exercise any vested awards.

“Good leaver” by reason of injury, ill health or disability, the sale of the participant’s employing company and business out of the Group and any other reason determined by the Committee

Awards will usually continue until the usual vesting date unless the Committee determines that the award will vest as soon as reasonably practicable following the date on which the participant ceases to be an employee or officer of the Group.

The Committee shall determine the extent to which awards vest in these circumstances, taking into account the extent to which any performance condition has been satisfied. Unless the Committee determines otherwise, the period of time that has elapsed since the award was granted will also be taken into account. Participants will have six months following vesting to exercise awards.


Awards will normally lapse.

2010 CSOP Where options vest before the end of any relevant performance period, the Committee may assess any relevant performance condition on such modified basis as the Committee may determine.

Death

Options will become exercisable to the extent that the performance conditions have been met for a period of 12 months following death.

“Good leaver” by reason of injury, ill health or disability, redundancy, retirement, the company for which the participant works leaving the Group or any other reasons determined by the Committee

Options which have not vested at the time of cessation vest on the normal vesting date to the extent that the performance conditions have been met and can be exercised within six months. Unless the Committee determines otherwise, the period of time that has elapsed since the award was granted will also be taken into account. Options which have already vested at the time of cessation may be exercised for six months following cessation of employment.

“Good leaver” by reason of the participant’s employing business leaving the Group

The Committee may notify participants when it becomes aware that a relevant business may be leaving the Group. If participants are given at least 14 days’ notice of the transfer, options vest to the extent that the performance conditions have been met and may be exercised until the completion of the transfer. Unless the Committee determines otherwise, awards shall be prorated for the period of time that has elapsed since the award was granted. If such notice is not given, options vest on the normal vesting date to the extent that the performance conditions have been met and may be exercised for a period of 12 months thereafter.


Options will normally lapse.

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Change of controlIn the event of a change of control or a voluntary winding-up of the Company:

• Awards granted under the 2015 Performance Share Plan will vest subject to the achievement of any relevant performance conditions (which may be adjusted to reflect the reduced performance period), any other factors the Committee determines relevant and, if the Committee determines it appropriate, time prorating, in an internal reorganisation of the Group, share awards will “roll over” into awards over shares in the acquiring company, unless the Committee determines otherwise

• Awards granted under the 2010 Deferred Bonus Plan will vest

• Options granted under the 2010 Company Share Option Plan will vest and may be exercised within six months of the takeover taking place or the relevant resolution being passed. However, in an internal reorganisation of the Group, options may be “rolled over” into shares over shares in the acquiring company

• In the event of a demerger, the Committee may determine that awards under the 2010 Deferred Bonus Plan and 2015 Performance Share Plan vest, and options granted under the 2010 Company Share Option Plan may be exercised early

Consulting with shareholdersThe Committee believes that it is very important to maintain open dialogue with shareholders on remuneration matters. Where significant changes are proposed to the executive directors’ reward framework, the Committee’s policy is to consult with major shareholders (unless not practical).

Since the last Policy was approved by shareholders at the 2015 AGM, we have consulted with shareholders from time to time on various remuneration-related matters. In response to investor feedback, various minor changes have been made to the operation of remuneration arrangements for executive directors to ensure continued support from the Company’s major shareholders and alignment with market and best practice.


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DIRECTORS’ REPORT

The directors are pleased to present their Annual Report, together with the audited financial statements, for the year ended 30 April 2018. The Annual Remuneration Report can be found on pages 59 to 68, the Audit Committee Report on pages 55 to 57, the Corporate Governance Report on pages 45 to 54 and the Corporate Responsibility review on pages 30 to 41.

The Annual Report has been prepared for, and only for, the members of the Company, as a body, and for no other persons. The Group, its directors, employees, agents or advisers, do not accept or assume responsibility to any person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. By their nature, the statements concerning the risks and uncertainties facing the Group in this Annual Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this Annual Report and the Group undertakes no obligation to update these forward-looking statements. Nothing in this Annual Report should be construed as a profit forecast.

Principal activities of the GroupThe principal activities of the Group during the year have been the design, development and manufacture of specialty medical drug delivery devices and services to the pharmaceutical industry through Bespak and the supply of active pharmaceutical ingredient (API) and finished dose formulation and manufacturing services through Aesica. Our device products now include metered dose inhalers, dry powder devices, actuators, dose counters, disposable auto-injectors, nasal devices and point of care diagnostics devices.

Strategic ReportThe Strategic Report can be found on pages 2 to 41. This report includes a balanced and comprehensive analysis of the development and performance of the business of the Group and a description of the main trends and factors likely to affect the future development, performance or position of the business at the end of the year, using key performance indicators where appropriate.

Principal risks and uncertaintiesA description of the Group’s principal risks and uncertainties can be found on pages 27 to 29, which forms part of this Directors’ Report.

Product development and research investmentThe Group has a programme of continuous investment in its product development activities. During the year, the Group invested £6.9m (FY2017: £6.5m) in research and development expenditure, of which £0.7m (FY2017: £nil) was capitalised and the balance expensed.

ResultsRevenue increased by 5.8% to £311.1m. Earnings before interest, tax and special items increased by 6.8% to £42.7m. Profit before tax and special items increased by 7.3% to £38.2m. Adjusted basic earnings per share decreased by 0.9% to 64.5p and basic earnings per share decreased by 28.8% to 32.9p.

DividendFollowing a review of performance, prospects and available funding, the directors propose a final dividend for the year of 13.56p per share (FY2017: 13.21p per share) to be paid on 26 October 2018 to shareholders on the register at close of business on 28 September 2018. An interim dividend of 7.44p per share (FY2017: 7.09p) was paid on 16 February 2018, making a total dividend for the year of 21.0p per share (FY2017: 20.3p).

Post-balance sheet eventsThere have been no adjusting nor non-adjusting post-balance sheet events.

DirectorsThe names of the directors as at the date of this report, together with brief biographical descriptions, appear on pages 42 and 43.

In accordance with section 992 of the Companies Act 2006, the directors disclose that rules regarding the appointment of directors are contained in the Company’s Articles of Association, which may only be amended with shareholder approval in accordance with the relevant legislation. The powers given to the directors are contained in the Articles and include, subject to relevant legislation and authority being given to the directors by shareholders in general meeting, authorisation for the Company to issue and buy back its own shares. The Company annually seeks the authority of shareholders for the exercise by the directors of these powers.

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All directors are subject to election at the next AGM following their appointment and to re-election thereafter at intervals of no more than three years in accordance with the Company’s Articles of Association. Accordingly, Ian Nicholson, Steve Crummett and Charlotta Ginman will seek re-election. Dr Peter Fellner and Dr William Jenkins, having now served more than nine years, also offer themselves for re-election until the date of the next AGM. Their biographical details are given on pages 42 and 43. Details of Dr Fellner’s, Dr Jenkins’, Mr Nicholson’s, Mr Crummett’s and Ms Ginman’s letters of appointment can be found on page 67. Further details on succession planning are set out in the Corporate Governance report.

At the meeting of the Board held on 11 June 2018, the Board considered the performance and ability of the directors standing for reappointment at the forthcoming Annual General Meeting. Each director concerned was considered to be an effective member of the Board who demonstrates the requisite level of commitment and acts in the long-term interests of the Company while having regard to other stakeholders. Accordingly, the Board recommends their reappointment to shareholders.

Directors’ remunerationThe Remuneration Report, which includes information regarding directors’ service contracts, appointment arrangements and interests in share options, can be found on pages 59 to 68.

Directors and their interestsDetails of the interests of the directors and their families in the ordinary share capital of the Company, as required to be disclosed in accordance with the Market Abuse Regulation, are given in the Remuneration Report. There were no changes in the directors’ shareholdings between 30 April 2018 and the date of this report, with the exception of the monthly partnership shares purchased under the Share Incentive Plan for Mr Glenn and Mr Hayes.

The Board has agreed procedures for considering and, where appropriate, authorising directors’ situational conflicts. None of the directors had any interest during or at the end of the year in any contract of significance in relation to the business of the Company or its subsidiary undertakings.

Directors’ indemnitiesQualifying third-party indemnity arrangements for the benefit of all its directors in a form and scope which comply with the requirements of the Companies Act 2006 were in place during the year. These arrangements remain in effect as at the date of this report.

Directors’ and officers’ liability insuranceInsurance cover is in force in respect of the personal liabilities which may be incurred by directors and officers of the Group in the course of their service with the Group.

Major shareholdingsAs at the date of this report, the Company has received notification from the following institutions of their and their clients’ interests which represent 3% or more of the voting rights of the issued share capital of the Company (in accordance with Rule 5 of the DTRs). The number of shares and the percentage interests are as disclosed at the date on which the interests were notified to the Company.

ShareholderNumber of

shares

Interest in issuedshares

Schroder Investment Management 3,563,750 7.26%Montanaro Asset Management 2,877,900 5.84%OppenheimerFunds Inc 2,856,109 5.81%Polar Capital LLP 2,485,527 5.04%Neptune Investment Management Limited 2,403,083 4.88%Legal & General Group plc 2,060,265 4.19%Artemis Investment Management 1,893,781 3.85%

EmployeesThe Group is an equal opportunities employer. It is committed to giving fair and equal treatment to all employees and job applicants in terms of recruitment, pay conditions, promotions, training and all employment matters regardless of their race, sex, ethnic background or religious beliefs, sexual orientation or disabilities. An equal opportunities policy together with an Equality, Diversity and Inclusion Policy are in force which aim to ensure that all employees are selected, trained, compensated, promoted and transferred solely on the strength of their ability, skills, qualifications and merit. The Group also believes that all employees have a right to work in an environment free from discrimination and bullying.

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The Group is committed to maximising the level of employee involvement in its business at all levels. Appropriate training is given to enable employees to perform their jobs more competently and to develop their skills and competencies to their full potential. The performance review system allows employees to discuss career opportunities and development and to receive guidance on achieving their goals. In addition, employees are supported, through sponsorship or a contribution to costs, to study for job-related qualifications.

The Group is committed to achieving the highest levels of quality: • Bespak is certified to ISO13485, which is the

internationally recognised standard that details the quality management system required to develop and manufacture medical devices. Staff working in Bespak operate within this system and are also trained in the regulatory requirements of pharmaceutical “Good Manufacturing Practice”. Bespak holds the appropriate licences from the MHRA to assemble, pack and release commercial pharmaceutical products

• Aesica manufacturing sites are licensed to manufacture pharmaceutical products by the appropriate Competent Authority of the country in which they are based and in accordance with EU law. Where sites export products to countries outside of Europe, the sites are also appropriately approved as well by other authorities, such as the US FDA for the United States, the ANVISA for Brazil, the Ministry of Industry and Trade of the Russian Federation for the Russian market and various other worldwide health authorities

The Group takes a proactive approach to consultation with employees on a variety of work-related issues through the use of consultative forums, whose members are elected by staff. Regular briefings are given to staff to keep them informed of matters concerning our business performance and strategy, including financial and economic factors affecting the Group.

The Group operates share option schemes, performance-related bonus schemes and the Share Incentive Plan, which relevant employees are encouraged to join.

Information about environmental, ethical, social and community matters is set out in the Corporate Responsibility review on pages 30 to 41.

Disability PolicyThe Group gives full and fair consideration to applications for employment from disabled persons. Opportunities also exist for employees of the Group who become disabled to continue in their employment or to be considered for other open positions in the Group and generally their training, career development and promotion.

Significant agreements – change of controlThere are a number of significant agreements containing provisions that take effect (including provisions permitting counterparties to terminate agreements) upon a change of control of the Company. These include both commercial and bank loan facilities agreements. Maintaining strong relationships with all counterparties is an important element in the risk management of the business and to help safeguard the Company’s interests to help mitigate against any impact resulting from any change of control of the Company, should it occur.

Share capital and controlDetails of the Company’s issued share capital are set out on page 129. All of the Company’s issued share capital comprises ordinary 10p shares which are fully paid up and rank equally in all respects.

The ordinary shares are listed on the Official List of the London Stock Exchange and are included in the techMARK index. In addition, the Company has entered into a Level 1 American Depositary Receipt (ADR) programme with the Bank of New York Mellon, under which the Company’s shares are traded on the over-the-counter market in the form of American Depositary Shares (ADS).

72,589 (FY2017: 81,037) new shares were issued during the year under the Company’s SAYE Scheme and Long-term Incentive Scheme. No new ordinary shares have been allotted under the Company’s share option schemes since the end of the year and up to the date of this report.

Rights attaching to sharesThe rights attaching to the Company’s ordinary shares, in addition to those conferred by law, are set out in the Company’s Articles of Association, copies of which can be obtained from Companies House in England and Wales or from the Company Secretary. The holders of ordinary shares are entitled to receive the Company’s reports and accounts, to attend and speak at general meetings of the Company, to appoint proxies and to exercise voting rights, and to participation in any distribution of income or capital.

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DIRECTORS’ REPORT CONTINUED

Transfers of sharesThere are no restrictions on the transfer of ordinary shares or on the exercise of voting rights attached to them save where the Company has exercised its rights to suspend their voting rights or to prohibit their transfer following the omission of their holder or any person interested in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act 2006 or where their holder is precluded from exercising voting rights by the Financial Services Authority Listing Rules or the City Code on Takeovers and Mergers. None of the shares carry any special rights with regard to the control of the Company.

The directors may refuse to register a transfer of ordinary shares where such transfer documents are not lodged by acceptable means or proof of title is required.

Purchase of own sharesAt the AGM on 6 September 2017, shareholders approved a resolution of the Company permitting it to purchase its own shares up to a maximum of 4,921,474 ordinary shares. This resolution remains valid until the conclusion of this year’s AGM. As at June 2018, the directors had not used this authority. A resolution will be proposed at this year’s AGM to renew this authority.

The Company’s share ownership trust currently holds 300,579 ordinary shares of 10p each, representing 0.61% of the Company’s issued share capital.

The trustees of the Consort Medical Employee Benefit Trust have elected to waive dividends on share held under trust relating to dividend payable during the year.

Issue of sharesAt the 2017 AGM, shareholders approved a resolution to give the directors authority to allot shares up to a maximum aggregate nominal value of £1,640,491 and further shares in accordance with The Investment Association guidelines in connection with a rights issue up to a maximum aggregate nominal amount of £3,280,982. In addition, shareholders approved a resolution giving the directors a limited power to allot shares for cash in other circumstances. These resolutions remain valid until the conclusion of this year’s AGM.

Resolutions will be proposed at this year’s AGM to renew these authorities.

Further explanation of the resolutions will be included with the Notice of AGM, which will be circulated to shareholders separately.

Share schemesA description of the share schemes operated by the Company is set out in the Remuneration Report on pages 59 to 68.

Political donationsNo political donations were made by the Group and its subsidiaries.

Greenhouse gas emissionsInformation on the Group’s Greenhouse Gas emissions (as required to be disclosed under the Companies Act 2006 (Strategic Report and Directors’ Report Regulations 2013)) is disclosed in our Corporate Responsibility report on page 34.

Disclosure of information to auditorsIn the case of each director, so far as each is aware, there is no relevant audit information of which the Company’s auditors are unaware. Each director has taken all the steps he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Annual General MeetingThe 2018 AGM of the Company will be held at the Company’s registered office in Hemel Hempstead on 5 September 2018 at 2 pm. Details of the resolutions to be proposed, together with the Notice of Meeting, are being sent to shareholders separately and will be posted on the Company’s website.

Corporate governanceThe main features of the Group’s internal controls and risk management systems in relation to the process for preparing consolidated financial statements can be found in the Corporate Governance Report on pages 45 to 54. The Corporate Governance Report forms part of this Directors’ Report and is incorporated into it by cross reference.

AuditorKPMG LLP are the Company’s auditor, having served throughout the year, and a resolution to reappoint them and to authorise the directors to set their remuneration will be proposed at the AGM.

The Directors’ Report above and the Strategic Report on pages 2 to 41 have been approved by the Board.

By order of the Board

PAUL HAYESDIRECTOR

13 June 2018


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

Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant and reliable;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU;

• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

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

Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge:

– the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

– the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

PAUL HAYESDIRECTOR

13 June 2018

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

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1 Our opinion is unmodified We have audited the financial statements of Consort Medical plc (“the Company”) for the year ended 30 April 2018 which comprise the Consolidated and Company Balance Sheet, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement, the Consolidated and Company Statements of Changes in Equity and the related notes, including the accounting policies in note 1.

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 30 April 2018 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);

• the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee.

We were appointed as auditor by the directors on 2 November 2015. The period of total uninterrupted engagement is for the three financial years ended 30 April 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

2 Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

Risks of material misstatement vs 2017

Recurring risks Impairment of Aesica Goodwill ◄►Revenue Recognition ◄►Recoverability of parent Company’s investment in Aesica Holdco Limited ◄►

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CONSORT MEDICAL PLC


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THE RISK OUR RESPONSE

Impairment of Aesica Goodwill (Aesica Goodwill: £113.8m (2017: £111.0m))

Refer to page 56 (Audit Committee Report), page 102 (accounting policy) and page 119 (financial disclosure).

Forecast-based valuationThe cash generating units (CGUs) to which goodwill is allocated are assessed for impairment using a discounted cash flow model to calculate a value in use, on an annual basis. Due to the inherent uncertainty involved in forecasting and discounting future cash flows, the valuation of goodwill is one of the key judgemental areas on which our audit focuses.

Our procedures included:Our sector experienceWe assessed and challenged whether there were any internal or external indicators of impairment associated with the goodwill that should have been considered by the directors, based on our knowledge of the Group and the market;

We also challenged the forecasted cash flows used in the discounted cash flow model by evaluating the Group’s budgeting procedures upon which the forecasts are based and critically assessing those cash flows in line with our knowledge of the business and the industry.

Benchmarking assumptions We have evaluated and considered the reasonableness of key assumptions including the discount rate, growth rate, foreign exchange rates, and cash flow forecasts by comparing the assumptions to externally derived data;

Sensitivity analysisWe performed breakeven analysis on the assumptions noted above;

Historical comparisonsWe assessed the accuracy of the current year forecasts by considering the accuracy of prior period forecasts; and

Assessing transparencyWe assessed the adequacy of the Group’s disclosures (see note 14) in respect of impairment testing and considered whether the disclosures reflected the risks inherent in the valuation of goodwill.

Our resultsWe found the resulting estimate of the recoverable amount of goodwill to be acceptable (2017 result: acceptable).

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INDEPENDENT AUDITOR’S REPORT CONTINUEDTO THE MEMBERS OF CONSORT MEDICAL PLC


Revenue recognition (£311.1m; 2017: £294.0m)

Refer to page 56 (Audit Committee Report), pages 99 to 100 (accounting policy) and pages 109 to 110 (financial disclosure).

The Group derives its revenues from a range of products and services, Complexity arises due to the large number of bespoke contracts.

Subjective estimateThe Group’s revenue is mainly derived from long-term manufacturing agreements. Certain areas of the business are more complex than others based on the type of contracts that are entered and the products supplied. The agreements vary from customer to customer in terms of minimum order quantities and payment mechanisms. The contractual dates do not always align with the Company’s financial year and as such, estimation is required in determining pricing and volume thresholds based on customer order estimates or the Company’s own past experience. Given the variety of individual contract terms and contractual periods, and that revenue is a material figure in the financial statements, we consider a significant risk exists in relation to the timing and value of revenue to be recognised.

Our procedures included:Test of details:We read a sample of revenue contracts for Bespak and Aesica to understand the contractual terms, including delivery quantities, milestones and other performance obligations. We then assessed whether the revenue recognised in respect of those contracts were appropriately accounted for in accordance with those contractual terms.

Control design, observation and operation:We assessed the effectiveness of controls around inputting information with respect to purchase orders, invoices and delivery documentation into the accounting system and the subsequent reporting of the associated revenue by way of observation.

Expectation vs outcome:For significant contracts in Bespak and certain contracts in Aesica, we developed an expectation of the revenue to be recognised based on the contractual terms with regards to price, and volumes delivered in the year, and compared to actual revenue; and

Our resultsThe results of our procedures were satisfactory and we considered the amount of revenue recognised to be acceptable (2017 result: acceptable).


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Recoverability of parent Company’s investment in Aesica Holdco Limited (£112.8m; 2017: £112.8m)

Refer to page 144 (accounting policy) and page 145 (financial disclosures).

Forecast-based valuationAs stated above, there is a Group risk of impairment of the Aesica Goodwill. In the parent Company’s standalone financial statements, this manifests itself as a risk that the carrying amount of the investment in Aesica Holdco Limited is not supported.

The carrying amount of the investment in Aesica Holdco Limited exceeds the net asset value £9.3m (2017: £9.3m) of the subsidiary and as such is at risk of irrecoverability.

The estimated recoverable amount of these balances is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows.

Our procedures included: Our sector experienceWe assessed and challenged whether there were any internal or external indicators of impairment associated with the investment that should have been considered by the directors, based on our knowledge of the Group and the market;

We also challenged the forecasted cash flows used in the discounted cash flow model by evaluating the Group’s budgeting procedures upon which the forecasts are based and critically assessing those cash flows in line with our knowledge of the business and the industry.

Benchmarking assumptions We have evaluated and considered the reasonableness of key assumptions including the discount rate, growth rate, foreign exchange rates, and cash flow forecasts by comparing the assumptions to externally derived data;

Sensitivity analysisWe performed breakeven analysis on the assumptions noted above;

Historical comparisonsWe assessed the accuracy of the current year forecasts by considering the accuracy of prior period forecasts; and

Our results:We found the Company’s assessment of the recoverability of the investment in subsidiaries to be acceptable (2017 result: acceptable).

We continue to perform procedures over impairment of customer relationship intangible assets and the Bespak goodwill. Given the level of headroom and the fact that there are no indicators of impairment we have not assessed these as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.

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3 Our application of materiality and an overview of the scope of our audit

Overview £1m (2017:£1m)

Materiality: group financial statements as a whole

4% (2017: 5%) of normalised group profit before tax

Coverage 95% (2017: 90%) of group profit before tax

Materiality for the Group financial statements as a whole was set at £1m (2017: £1m), determined with reference to a benchmark of Group profit before tax, normalised to exclude reorganisation costs of £4.6m and impairment of property, plant and equipment of £4.2m, as disclosed in note 6 (2017: reorganisation costs of £0.5m and advisory and acquisition costs of £0.2m), of which it represents 4% (2017: 5%).

Materiality for the parent Company financial statements as a whole was set at £530k (2017: £650k) determined with reference to a benchmark of net assets and chosen to be lower than materiality for the Group financials as a whole. It represents 0.3% (2017: 0.4%) of the stated benchmark.

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £50k (2017: £50k), in addition to other identified misstatements that we believe warranted reporting on qualitative grounds.

Of the Group’s 27 components (2017: 27 components), we subjected 16 (2017: 15) to audits for group reporting purposes. These accounted for 100% (2017: 93%) of the Group’s revenues, 95% (2017: 90%) profit before taxation, and 99% (2017: 96%) of the Group’s total assets. For the remaining components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement with these.

The Group audit team instructed the component auditor as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group audit team approved the component materialities, which ranged from £190k to £700k (2017: £281k to £700k), having regard to the mix of size and risk profile of the Group across the components. The work on 2 (2017: 1) of the 16 components was performed by component auditors and the rest by the Group audit team.

The Group audit team held telephone conference meetings with the overseas group reporting component auditors, and also attended the audit clearance meetings. At these meetings, the audit approach, findings and observations reported to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by the component auditors.

4 We have nothing to report on going concern We are required to report to you if:

• we have anything material to add or draw attention to in relation to the directors’ statement in note 1 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of that basis for a period of at least twelve months from the date of approval of the financial statements

• the related statement under the Listing Rules set out on page 54 is materially inconsistent with our audit knowledge

We have nothing to report in these respects.

5 We have nothing to report on the other information in the Annual Report

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors’ report Based solely on our work on the other information:

• we have not identified material misstatements in the strategic report and the directors’ report;

• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

• in our opinion those reports have been prepared in accordance with the Companies Act 2006.


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Directors’ remuneration report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Disclosures of principal risks and longer-term viability Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

• the directors’ confirmation within the viability statement on page 53 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;

• the Principal Risks & Uncertainties disclosures describing these risks and explaining how they are being managed and mitigated; and

• the directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the viability statement. We have nothing to report in this respect.

Corporate governance disclosures We are required to report to you if:

• we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy; or

• the section of the annual report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.


6 We have nothing to report on the other matters on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.


7 Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 85, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

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Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detectWe identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience, and through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence.

We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company legislation) and taxation legislation. We considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items.

In addition we considered the impact of laws and regulations in the specific areas of health and safety, anti-bribery, employment law, and certain aspects of industry regulations recognising the financial and regulated nature of the group’s activities. With the exception of any known or possible non-compliance, and as required by auditing standards, our work in respect of these was limited to enquiry of the directors and other management and inspection of regulatory and legal correspondence.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication from the group to component audit teams of relevant laws and regulations identified at group level, with a request to report on any indications of potential existence of non-compliance with relevant laws and regulations (irregularities) in these areas, or other areas directly identified by the component team.

As with any audit, there remained a higher risk of non-detection of non-compliance with relevant laws and regulations (irregularities)/ irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

8 The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Lynton Richmond (Senior Statutory Auditor) For and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants 15 Canada Square London E14 5GL

13 June 2018


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Notes 2018

£m 2017

£m

Revenue 2 311.1 294.0 Operating expenses before special items 3 (268.4) (254.0)Operating profit before special items 42.7 40.0 Special items 6 (20.9) (13.7)

Operating profit 21.8 26.3 Finance income 7 0.2 0.1 Finance costs 8 (3.2) (3.0)Other finance costs 9 (1.5) (1.5)Profit before tax and special items 38.2 35.6 Special items 6 (20.9) (13.7)

Profit before tax 17.3 21.9 Tax on profit before special items (6.6) (3.8)Special items - tax 6 5.4 4.5

Tax (charge)/credit 10 (1.2) 0.7 Profit for the financial year 16.1 22.6

Earnings per share, attributable to the equity holders of the parentBasic earnings per ordinary share 11 32.9p 46.2p Diluted earnings per ordinary share 11 32.7p 45.7p

Non-statutory measures: £m £m Profit before tax and special items 38.2 35.6 Profit after tax before special items 11 31.6 31.8 Adjusted basic earnings per ordinary share 11 64.5p 65.1p Adjusted diluted earnings per ordinary share 11 63.9p 64.4p

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 APRIL 2018

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 APRIL 2018

Notes 2018

£m 2017

£m

Profit for the financial year 16.1 22.6

Other comprehensive income/(loss)Items that may be reclassified subsequently to profit and loss:

Net loss on hedge of a net investment (1.3) (2.5)Exchange movements on translation of foreign subsidiaries 5.7 9.0

Items that will not be reclassified subsequently to profit and loss:

Actuarial gain/(loss) on defined benefit pension schemes 21 29.2 (18.3)Deferred tax on actuarial (gain)/loss 10 (5.6) 3.3 Impact of change in tax rates 10 0.6 (0.4)Other comprehensive income/(loss) for the year 28.6 (8.9)Total comprehensive income for the year 44.7 13.7

Attributable to equity holders of the parent 44.7 13.7


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CONSOLIDATED BALANCE SHEET AT 30 APRIL 2018

Notes 2018

£m 2017

£m

AssetsNon-current assetsProperty, plant and equipment 13 147.7 143.6 Goodwill 14 129.6 126.8 Other intangible assets 15 47.6 57.1 Investments 16 11.4 11.4 Trade and other receivables 18 3.8 –

340.1 338.9 Current assetsInventories 17 35.2 34.4 Trade and other receivables 18 68.8 54.9 Current tax asset 10 6.6 10.7 Cash and cash equivalents 19 21.4 22.2

132.0 122.2 Total assets 472.1 461.1 LiabilitiesCurrent liabilitiesBorrowings 23 (116.9) (112.0)Trade and other payables 20 (71.4) (67.1)Derivative financial instruments 25 (0.2) (0.2)Provisions and other liabilities 22 (3.4) (2.5)

(191.9) (181.8)Net current liabilities (59.9) (59.6)Non-current liabilitiesTrade and other payables 20 (1.7) (8.5)Deferred tax liabilities 10 (16.2) (13.8)Defined benefit pension schemes deficit 21 (14.7) (44.6)Provisions and other liabilities 22 (1.3) (0.3)

(33.9) (67.2)Total liabilities (225.8) (249.0)Net assets 246.3 212.1 Shareholders’ equityShare capital 24 4.9 4.9 Share premium 24 138.5 138.0 Retained earnings 92.6 63.3 Other reserves 10.3 5.9 Total equity 246.3 212.1

The financial statements on pages 93 to 141 were approved and authorised for issue by the Board on 13 June 2018 and signed on its behalf by:

Directors:JONATHAN GLENNPAUL HAYES

Consort Medical plcRegistered number: 406711

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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 APRIL 2018

Notes 2018

£m 2017

£m

Cash flows from operating activitiesOperating profit 21.8 26.3 Depreciation 13 13.1 12.1 Impairment 3.8 – Amortisation 15 12.5 13.4 Loss on disposal of property, plant and equipment 0.2 0.2 Share-based payments 1.1 1.3 Pension charge in excess of cash contributions 0.1 0.1 Increase in inventories (0.3) (2.7)(Increase)/decrease in trade and other receivables (16.7) 0.7 (Decrease)/increase in trade and other payables (1.2) 1.0 Increase/(decrease) in provisions 2.8 (3.4)Decrease in derivative financial instruments (0.1) (0.1)Cash generated from operations 37.1 48.9 Interest paid (2.9) (2.9)Defined benefit scheme contributions (2.1) (2.0)Tax received/(paid) 0.3 (3.3)Net cash inflow from operating activities 32.4 40.7

Cash flows from investing activitiesPurchases of property, plant and equipment (20.9) (18.0)Purchases of intangible assets (1.3) (0.1)Interest received 0.2 0.1 Purchase of equity investment 16 – (3.1)Net cash outflow from investing activities (22.0) (21.1)

Cash flows from financing activitiesProceeds from issues of ordinary share capital 24 0.5 0.6 Purchase of own shares (2.2) (3.0)Equity dividends paid to shareholders 12 (10.1) (9.6)Increase in borrowings 15.6 12.3 Borrowings repaid (12.7) (16.4)Net cash used in financing activities (8.9) (16.1)

Net increase in cash and cash equivalents 1.5 3.5 Effects of exchange rate changes 0.5 (0.3)Cash and cash equivalents at start of year 19.4 16.2 Cash and cash equivalents at end of year 19 21.4 19.4


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 APRIL 2018

Attributable to owners of the parentShare

capital£m

Share premium

£m

Retained earnings

£m

Translation reserve

£m

Total equity

£m

Balance at 1 May 2016 4.9 137.4 67.4 (0.6) 209.1 Profit for the financial year – – 22.6 – 22.6 Other comprehensive income/(loss):Net exchange movements on translation of foreign subsidiaries – – – 6.5 6.5 Actuarial loss on defined benefit pension scheme – – (18.3) – (18.3)Tax on amounts taken directly to equity – – 2.8 – 2.8 Total comprehensive income – – 7.1 6.5 13.6 Transactions with owners:Recognition of share-based payments (note 4) – – 1.3 – 1.3 Movement in tax arising on share-based payments – – 0.1 – 0.1 Proceeds from exercise of employee options – 0.6 – – 0.6 Consideration paid for purchase of own shares (held in trust) – – (3.0) – (3.0)Equity dividends (note 12) – – (9.6) – (9.6)

– 0.6 (11.2) – (10.6)Balance at 30 April 2017 4.9 138.0 63.3 5.9 212.1 Profit for the financial year – – 16.1 – 16.1 Other comprehensive income/(loss):Net exchange movements on translation of foreign subsidiaries – – – 4.4 4.4 Actuarial gain on defined benefit pension scheme – – 29.2 – 29.2 Tax on amounts taken directly to equity – – (5.0) – (5.0)Total comprehensive income – – 40.3 4.4 44.7 Transactions with owners:Recognition of share-based payments (note 4) – – 1.1 – 1.1 Movement in tax arising on share-based payments – – 0.2 – 0.2Proceeds from exercise of employee options – 0.5 – – 0.5 Consideration paid for purchase of own shares (held in trust) – – (2.2) – (2.2)Equity dividends (note 12) – – (10.1) – (10.1)

– 0.5 (11.0) – (10.5)Balance at 30 April 2018 4.9 138.5 92.6 10.3 246.3

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General informationConsort Medical plc is a public limited company listed on the London Stock Exchange and is incorporated and domiciled under the laws of England and Wales, registered number 406711. The address of the registered office is given on page 150. The nature of the Group’s operations and its principal activities are set out in the Strategic Report on pages 2 to 41.

1. Presentation of the financial statements and accounting policies

Basis of preparationThe financial statements have been prepared in accordance with the Companies Act 2006 applicable to those companies reporting under IFRS, Article 4 of the IAS Regulation and International Accounting Standards and International Financial Reporting Standards (collectively referred to as “IFRS”) and related interpretations, as adopted for use in the European Union in all cases.

Accounting conventionThe financial statements have been prepared using the historical cost convention, as modified by certain financial assets and financial liabilities (including derivative instruments) at fair value. The specific accounting policies adopted, which have been approved by the Board and which have been applied consistently in all years presented, are described within this note.

Going concernAfter making enquiries, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operation for the foreseeable future and to meet their obligations as they fall due. As at 30 April 2018 the Group reported net debt of £95.5m (2017: £92.6m) which compared with committed banking facilities of £168.6m, leaving £51.3m of headroom undrawn. The Group’s primary committed financing facility is available to September 2019. Accordingly these financial statements have been prepared on a going concern basis.

ConsolidationThe financial statements include the financial statements of the Company and all the subsidiaries during the years reported for the periods during which they were members of the Consort Medical plc group (“the Group”).

Segmental reportingThe Group’s chief operating decision-maker is considered to be the Executive Committee. This committee is responsible for the executive management of the Group and comprises the Chief Executive Officer, the Chief Financial Officer, the Company Secretary/Group General Counsel, the Managing Directors of the Group’s Bespak and Aesica businesses and the Director of Group Human Resources. The Executive Committee meets regularly to make decisions on operational and strategic matters, other than those reserved for the Board, including allocation of resources and assessment of the performance of the Group. The Group’s operating segments are determined with reference to the information that is supplied to the Executive Committee in order for it to allocate the Group’s resources and to monitor the performance of the Group. Following the acquisition of Aesica Holdco Limited (‘Aesica’) on 12 November 2014, the Executive Committee focuses on the operations of the Group by treating the Bespak and Aesica divisions as individual operating segments and, as a result, the Group has two operating segments.

Subsidiaries The consolidated financial statements combine the financial statements of the parent company and all its subsidiaries made up to 30 April 2018. Subsidiaries are entities which are directly or indirectly controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of completion. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Costs of acquisition are charged to the income statement in the period in which they are incurred.

NOTES TO THE CONSOLIDATED ACCOUNTS


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1. Presentation of the financial statements and accounting policies continued

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39, either in profit or loss or as a change in other comprehensive income. Inter-company transactions, balances and unrealised gains or losses on transactions between Group undertakings are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Uniform accounting policies have been adopted across the Group.

InvestmentsEquity investments in entities that are neither associates nor subsidiaries are held at fair value.

Foreign currenciesItems included in the financial statements of all Group undertakings are measured using that entity’s functional currency, which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Sterling, which is the parent company’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

The results and financial position of all Group undertakings that have a functional currency different from the presentation currency are translated into the presentation currency with: (i) assets and liabilities for each balance sheet translated at the closing rate at the date of that balance sheet; (ii) income and expenses for each income statement translated at average exchange rates for the period; and (iii) all resulting exchange differences recognised as a component of other comprehensive income. In the case of subsidiaries acquired during a financial year, the average exchange rate takes into account the period of ownership only.

Exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are recognised in the translation reserve within other comprehensive income.

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

The principal exchange rates applied in the preparation of the financial statements were as follows:

2018 2017

GBP : EUR at the end of the year 1.14 1.19GBP : USD at the end of the year 1.38 1.29GBP : EUR average for the year 1.13 1.18GBP : USD average for the year 1.34 1.29

RevenueRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services. Revenue from sales of products is recognised when the risks and rewards of ownership pass to the customer, and is stated net of value added tax and other sales taxes. The point at which risk and reward is transferred is usually determined from shipping terms, which vary from customer to customer. Revenue from sales of services is recognised in the period in which the related chargeable costs are incurred or when revenue is earned under contractual obligations. Revenue from sales of tooling is recognised on a net basis, having regard to the transfer of risks and rewards. Revenue is recognised when it is probable that economic benefits associated with the transaction will flow to the Group.

Advance payments received from customers are credited to deferred income and the related revenue is released to the income statement in accordance with the recognition criteria described above.

Where a manufacturing contract includes variable consideration (such as a minimum order guarantee), the transaction price includes management’s best estimate of the variable consideration receivable at the balance sheet date.

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NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED


On occasions, the Group receives cash in advance of delivering goods and services to customers to compensate for costs incurred in design and development activities including the acquisition of development assets. Where such amounts are received and the risk and rewards of ownership over the development assets remain with the customer, the amounts received are deferred on the balance sheet and taken to revenue as the Group delivers products or services to the customer in accordance with its contractual obligations.

Government grantsGovernment grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Grants received are revenue-related and are credited to the income statement, within operating profit, so as to match them with the expenditure to which they relate to the extent that it is probable that all conditions have been complied with.

Post-employment benefitsThe Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans.

(a) Pension obligationsA defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions once the contributions have been paid. The Group pays contributions to publicly and privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.

(b) Termination benefitsTermination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

(c) Profit-sharing and bonus plansThe Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.


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Share-based paymentsThe Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:• including any market performance conditions (for

example, an entity’s share price);• excluding the impact of any service and non-market

performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

• including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Property, plant and equipmentProperty, plant and equipment is stated at cost including any incidental costs of acquisition less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Assets acquired through business combinations are initially recognised at their fair value. Depreciation is recognised so as to write off the cost of property, plant and equipment (less the current expected residual value) on a straight-line basis over their expected useful lives as follows:

• Freehold buildings and leasehold buildings with original lease terms over 50 years – 50 years

• Leasehold buildings with original lease terms less than 50 years – Remaining period of lease

• Cleanrooms – 20 years• Building services – 10 to 20 years• Mould and assembly machines – Utilisation basis• Plant, equipment and vehicles – 3 to 10 years

Cleanrooms and building services are categorised within plant and equipment. Land is not depreciated.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. The method of depreciation for mould and assembly machines is a utilisation basis, reflecting the amount a machine is used during an accounting period. This method is considered to better reflect the economic consumption of the value attributable to these machines.

Assets which have been transferred from or funded by a customer are not capitalised if the Group does not obtain control of these assets. If the Group has obtained control of an asset that has been contributed or funded by a customer, then the asset is recognised and the contribution released to income over an appropriate term in accordance with the Group’s policy on revenue recognition.

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Assets under constructionThe costs of property, plant and equipment are capitalised as incurred and are not depreciated until such time as the assets are commissioned, when the total costs are transferred to the appropriate asset category.

GoodwillGoodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of:

• the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity; over

• the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill is not amortised but is reviewed for impairment at least annually and more frequently if events or circumstances give indicators of an impairment. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Internally generated intangible assets – research and development expenditureExpenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group’s product development is recognised only if all of the following conditions are met:• an asset is created that can be identified;• it is probable that the asset created will generate

future economic benefits; • it is technically feasible that the intangible asset can

be completed so that it will be available for use or sale and there are sufficient available resources to complete it; and

• the development cost of the asset can be measured reliably.

Where a product requires regulatory approval prior to launch, it is presumed that there is insufficient certainty over the product’s technical feasibility to recognise an intangible asset prior to that approval being obtained.

Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. The estimated useful economic life of capitalised development costs is five to ten years. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.


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Other intangible assetsOther intangible assets, including purchased patents, know-how, trademarks, software licences, customer contracts and relationships and distribution rights are capitalised at cost and amortised on a straight-line basis or sum of digits basis over their estimated useful economic lives through operating expenses. The estimated useful lives of other intangible assets are as follows:• Computer software: 4 to 5 years• Patented and unpatented technology and

know-how: 10 years• Trademarks and trade names: 10 years• Customer contracts and relationships:

– 11 to 13 years on a sum of digits method (Aesica related)

– 5 to 10 years on a straight line basis (other)• Licences and distribution agreements: 2 to 11 years

The amortisation method applied to the Aesica intangible assets on acquisition is deemed to better reflect the pattern in which the future economic benefits are expected to be consumed.

Impairment of property, plant and equipment and intangible assets excluding goodwillThe carrying values of property, plant and equipment and intangible assets excluding goodwill are reviewed for impairment when events or changes in circumstance indicate that the carrying value may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss. Where it is not possible to identify separate cash flows relating to individual assets, the Group estimates the recoverable amount of the cash-generating unit to which it belongs. Where tangible and intangible assets excluding goodwill have suffered an impairment, they are reviewed for possible reversal of the impairment at each reporting date.

Leasing commitmentsLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Leasing agreements which transfer to the Group substantially all the benefits and risks of ownership of an asset are treated as finance leases. Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

When acting as lessor, under a finance leasing arrangement, the Company recognises assets held under a finance lease in the balance sheet as a receivable equal to the net investment in the lease. The recognition of finance income is based on a constant periodic rate of return on the net investment in the finance lease.

InventoriesInventories and work in progress are stated at the lower of cost and net realisable value. Cost comprises the direct cost of production and the attributable portion of overheads based on normal operating capacity appropriate to location and condition. Cost is determined on a first-in, first-out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is made if necessary for any slow-moving, obsolete or defective inventory.

Cash and cash equivalents In the consolidated and Company statements of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the consolidated and Company balance sheets, bank overdrafts are shown as current liabilities within trade and other payables.

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Finance income and costsInterest receivable and payable on bank deposits and borrowings is credited or charged to finance income and expenses as it falls due.

Provisions, contingent liabilities and contingent assetsProvisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as other finance expenses.

A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

Trade receivablesTrade receivables are recognised initially at fair value and subsequently held at amortised cost. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Trade payablesTrade payables are recognised initially at fair value and subsequently held at amortised cost.

Borrowings and borrowing costsInterest-bearing bank loans and overdrafts are recorded at fair value, net of direct issue costs and subsequently stated at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to the income statement and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

DividendsDividends are recorded in the financial statements in the period in which they are approved by the Company’s shareholders. Interim dividends are recorded in the period in which they are approved and paid.

TaxationThe charge for current taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using rates that have been enacted, or substantially enacted, by the balance sheet date. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the relevant taxation authorities.

Tax that relates to items recognised in other comprehensive income or in equity is recognised in other comprehensive income or equity respectively.

Deferred taxation is accounted for in full using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.


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Deferred tax liabilities are recognised for all taxable temporary differences except in respect of investments in subsidiaries where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilised. Their carrying amount is reviewed at each balance sheet date on the same basis.

Deferred tax is measured at the tax rates that are expected to apply in the periods in which the asset or liability is settled. It is recognised in the consolidated income statement except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Research and Development Expenditure Credit (“RDEC”) has been available to UK companies on qualifying expenditure incurred since 1 April 2013 and is of the nature of a government grant. Where UK companies within the Group expect to elect for RDEC the amount receivable is recorded as income and is included in profit before tax, netted against research and development expenses.

Share capital, share premium and share issue costsShare issue costs are incremental costs directly attributable to the issue of new shares or options and are shown as a deduction, net of tax, from the proceeds. Any excess of the net proceeds over the nominal value of any shares issued is credited to the share premium account.

Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

Derivative financial instruments and hedging activitiesDerivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value at each reporting date. Any gain or loss on remeasurement is recognised in the income statement.

Net investment hedgesWhere the Group has entered into borrowings which form part of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, these are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised in the statement of other comprehensive income while any gains or losses relating to the ineffective portion are recognised in the income statement through profit or loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to profit or loss.

The Group uses a loan as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries. Refer to note 25 for more details.

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Critical accounting judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies, which are described in this note, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management that have a significant effect on the Group financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the relevant notes to these consolidated financial statements. Management discusses with the Audit Committee the development, selection, application and disclosure of the Group’s critical accounting policies and estimates.

The following are the critical judgements that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

A. Carrying value of Goodwill The Group tests, at least annually, whether goodwill has suffered any impairment in accordance with the accounting policy above. Goodwill recognised as part of the Aesica and The Medical House acquisitions have been subject to an impairment test in the current year. The recoverable amounts are determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a suitable discount rate in order to calculate the present value of these cash flows. Actual outcomes could vary.

B. Alternative performance measures and the treatment of special items

In addition to statutory measures the Group has consistently presented a number of alternative performance measures (“APMs”), including performance before special items and constant currency performance, as the directors consider these APMs provide additional useful information for shareholders on the underlying performance of the business. Special items require management’s judgement regarding their treatment and presentation. Further details on the use of APMs is included overleaf.

C. Revenue recognitionThe Group’s revenue recognition policies require management to make judgements in respect of the revenue accounting for major manufacturing contracts and/or material amendments to contracts.

The key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.


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A. Post-employment benefits The determination of the pension cost and defined benefit obligation of the Group’s defined benefit pension schemes depends on the selection of certain assumptions which include the discount rate, inflation rate, salary growth, mortality and expected return on scheme assets. Differences arising from actual experiences or future changes in assumptions will be reflected in subsequent periods (see note 21). The net pension deficit at 30 April 2018 was £14.7m (30 April 2017: £44.6m).

B. ProvisionsProvisions are liabilities of uncertain timing or amount and therefore judgement is applied in making a reliable estimate of the quantum and timing. In determining the amount to recognise for any provisions, management consults with suitably qualified and experienced Group personnel, considers the Group’s experience of similar matters and communications with potential counterparties and the Group’s legal advisers. The total value of provisions at 30 April 2018 was £4.7m (30 April 2017: £2.8m).

Alternative performance measures and the treatment of special itemsAs disclosed above, in addition to statutory measures, a number of alternative performance measures (“APMs”) are included in this Annual Report to assist investors in gaining a clearer understanding and balanced view of the Group’s underlying performance and in comparison with performance across the industry. These measures are consistent with how business performance is measured internally.

The APMs used include statutory EBIT, EBT and EPS measures, adjusted to eliminate special items, being the amortisation of acquired intangibles and other significant one-off items not linked to the underlying performance of the business. Further, underlying constant exchange rate measures are given which eliminate the impact of currency movements by comparing the current year measure against the comparative restated at the current year’s average exchange rate. Where APMs are given, these are compared to the equivalent measures in the prior year.

Further detail on the special items in the year can be found in note 6. The directors also refer to EBITDA before special items (earnings before interest, tax, depreciation and amortisation) as a performance measure and in arriving at this, any profit or loss on disposal of property, plant and equipment is also added back.

Reconciliation of statutory measures to Alternative Performance Measures

2018£m

2017£m

Profit before tax 17.3 21.9Add back: net finance costs 4.5 4.4 Operating profit 21.8 26.3 Add back: Special items 20.9 13.7 Operating profit before special items 42.7 40.0 Depreciation (note 13) 13.1 12.1 Amortisation (note 15) 12.5 13.4 Less: Amortisation of acquired intangibles (note 6) (12.1) (13.0)Loss on disposal of property, plant and equipment 0.2 0.2 EBITDA before special items 56.4 52.7

Profit before tax 17.3 21.9Add back: net finance costs 4.5 4.4 Operating profit 21.8 26.3 Add back: Special items 20.9 13.7 Operating profit before special items 42.7 40.0 Finance income 0.2 0.1 Finance costs (3.2) (3.0)Other finance costs (1.5) (1.5)Earnings before tax and special items 38.2 35.6

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At constant exchange rates (“CER”) – FY2017 restated at the FY2018 average rate:

Reported 2017

£m

CER 2017

£m

Revenue 294.0 298.1 Adjusted operating profit 40.0 40.6

Adoption of new and revised standardsThe following new standards and amendments have been applied for the first time during the year commencing 1 May 2017 but do not have a material impact on the Group:

IAS 7 – Disclosure Initiative – (Amendments to IAS 7)

IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses

Annual Improvements to IFRS standards (2014 – 2016 cycle) – Amendments to IFRS 12

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the EU):

IFRS 15 – Revenue from Contracts with Customers

IFRS 9 – Financial Instruments (2014)

Amendments to IFRS 2 – Classification and Measurement of Share Based Payment Transactions

Annual Improvements to IFRS Standards (2014 – 2016 cycle) – Amendments to IFRS 1 and IAS 28

IFRIC 22 – Foreign Currency Transactions and Advance Consideration

IFRS 16 – Leases

IFRIC 23 – Uncertainty over Income Tax Treatments

Amendments to IFRS 9 – Prepayment Features with Negative Compensation

Amendments to IAS 19 – Plan Amendment, Curtailment and Settlement

Annual Improvements (2015 – 2017 cycle)

IFRS 15 – Revenue from Contracts with CustomersIFRS 15 – Revenue from Contracts with Customers was issued in May 2014 and has been adopted by the Group effective 1 May 2018. The standard provides a single, principles-based approach to the recognition of revenue from all contracts with customers. It focuses on the identification of performance obligations in a contract and requires revenue to be recognised when or as those performance obligations are satisfied.

The Group performed a review of all material contracts based on their value and significance, including those currently being negotiated with customers, and used a five step model to understand and quantify any differences in its revenue recognition approach arising as a result of the implementation of the new standard.

As a result of the above review, the new standard is not expected to have a material impact on the future amounts or timing of recognition of reported revenue. Based on the analysis of significant contracts, no adjustment will be required to be reflected in equity at 1 May 2018 on adoption of IFRS 15 by the Group, nor, in accordance with the requirements of the standard, will prior year results require to be restated.

The following accounting standards relevant to the Group have not been early adopted as the Group carries out an assessment of their potential impact:

IFRS 16 – Leases

IFRS 9 – Financial Instruments (2014)


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2. Segmental informationThe Group’s operating segments are determined with reference to the information which is supplied to the Executive Committee in order for it to allocate the Group’s resources and to monitor the performance of the Group. This information analyses the Group between its two divisions, Bespak and Aesica. The Executive Committee assesses the performance of the operating segments based on a measure of adjusted operating profit which excludes the impact of special items from the operating segments. Special items are analysed in note 6.

The segment information provided to the Executive Committee for both of these reportable segments for the year ended 30 April 2018 is as follows:

For the year ended 30 April 2018Bespak

£mAesica

£mUnallocated

£mTotal

£mRevenue from products 118.5 171.8 – 290.3 Revenue from services 8.4 12.4 – 20.8 Revenue by business segment 126.9 184.2 – 311.1 Segment operating profit before special items 26.5 16.2 42.7 Special items excluding amortisation of acquired intangibles (note 6) (5.6) (3.2) – (8.8)Amortisation of acquired intangibles (note 6) (0.8) (11.3) – (12.1)Segment operating profit 20.1 1.7 – 21.8 Finance income (note 7) 0.2 Finance costs (note 8) (3.2)Other finance costs (note 9) (1.5)Profit before tax 17.3 Taxation (note 10) (1.2)Profit for the financial year 16.1 Segmental balance sheetTotal assets 147.4 300.6 24.1 472.1 Total liabilities (39.4) (64.9) (121.5) (225.8)Net assets 108.0 235.7 (97.4) 246.3 Other segment information Capital expenditure:Property, plant and equipment (note 13) 8.1 11.4 0.9 20.4 Intangible asset additions (note 15) 0.9 0.2 0.2 1.3 Total capital expenditure 9.0 11.6 1.1 21.7 Amortisation of intangible assets (note 15) (1.0) (11.5) – (12.5)Depreciation (note 13) (6.0) (7.0) (0.1) (13.1)Impairment of property, plant and equipment (note 13) (3.0) (0.8) – (3.8)Goodwill (note 14) 15.8 113.8 – 129.6 Loss on disposal of fixed assets (note 3) – (0.2) – (0.2)

Bespak’s core business is the design, development and manufacture of high-performance medical delivery devices and its operations are based in the United Kingdom. Aesica develops, formulates and manufactures active pharmaceutical ingredients and finished dose drugs to the highest quality standards, and its operations are based in the United Kingdom and Europe.

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2. Segmental information continued

For the year ended 30 April 2017Bespak

£mAesica

£mUnallocated

£mTotal

£mRevenue from products 105.3 155.4 – 260.7 Revenue from services 15.8 17.5 – 33.3 Revenue by business segment 121.1 172.9 – 294.0 Segment operating profit before special items 26.1 13.9 – 40.0 Special items excluding amortisation of acquired intangibles (note 6) – – (0.7) (0.7)Amortisation of acquired intangibles (note 6) (0.8) (12.2) – (13.0)Segment operating profit/(loss) 25.3 1.7 (0.7) 26.3 Finance income (note 7) 0.1 Finance costs (note 8) (3.0)Other finance costs (note 9) (1.5)Profit before tax 21.9 Taxation (note 10) 0.7 Profit for the financial year 22.6 Segmental balance sheetTotal assets 139.1 299.7 22.3 461.1 Total liabilities (63.5) (69.8) (115.7) (249.0)Net assets 75.6 229.9 (93.4) 212.1 Other segment informationCapital expenditure:Property, plant and equipment (note 13) 6.3 11.3 0.3 17.9 Intangible asset additions (note 15) – 0.1 – 0.1 Investment (note 16) – – 3.1 3.1 Total capital expenditure 6.3 11.4 3.4 21.1 Amortisation of intangible assets (note 15) (1.0) (12.4) – (13.4)Depreciation (note 13) (5.8) (6.3) – (12.1)Goodwill (note 14) 15.8 111.0 – 126.8 Loss on disposal of fixed assets (note 3) – (0.2) – (0.2)Trade receivables impairment (note 18) – (0.1) – (0.1)

Geographical analysisThe Group’s operations are based in the United Kingdom and Europe.

Revenue by destination

Total 2018

£m

Total 2017

£m

Europe 201.3 181.3

United States of America 48.0 47.9

United Kingdom 28.7 24.9

Rest of the World 33.1 39.9

Total revenue 311.1 294.0

£103.2m (FY2017: £91.6m) of the Group’s revenues originated in Europe and the remainder originated from the United Kingdom. The Group’s total non-current assets in the current year attributable to the United Kingdom are £313.0m (FY2017: £318.9m) and Europe are £24.0m (FY2017: £19.9m).

Major customersThe Group has total revenues from one major customer of £73.7m (2017: £62.1m). These revenues are from the Bespak and Aesica segments combined.


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3. Operating expenses Total

2018£m

2017£m

Raw materials and consumables 84.3 74.1 Other external charges 84.4 83.8 Staff costs (note 4) 93.8 85.0 Depreciation (note 13) 13.1 12.1 Amortisation of acquisition- related intangible assets (note 15) 12.1 13.0 Amortisation of other intangible assets (note 15) 0.4 0.4 Loss on disposal of property, plant and equipment 0.2 0.2 Exchange losses (0.3) (0.1)

288.0 268.5 Increase/(decrease) in inventory of finished goods and work in progress 1.3 (0.8)

289.3 267.7

Operating expenses include the following:Operating lease rentals (as lessee) 1.6 1.7 Research and development 6.2 6.5 Trade receivables impairment (note 18) – 0.1 Property, plant and equipment repairs and maintenance 10.3 21.5 Cost of inventories recognised as an expense 84.3 74.1 Change in the fair value of derivative instruments outstanding at year end and classified as fair value through profit and loss 0.1 0.3

Services provided by the Company’s auditorsFees payable for the audit of the parent Company and consolidated accounts 0.1 0.1 Fees payable for other services:– Statutory audits of accounts of subsidiaries 0.3 0.3

Non-audit fees incurred in the year of £3,000 (FY2017: £nil) related to other assurance services in respect of a past employment grant.

No government grants were received in the year (FY2017: £nil). The Group realised an R&D tax credit of £2.2m (FY2017: £1.8m) which was recognised through operating profit. Research and development costs disclosed above are net of R&D tax credit.

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4. Employees Staff costs and the average monthly number of employees analysed by activity, including executive directors, are shown below:

Total2018

£m

Total2017

£m

Wages and salaries 77.3 70.2 Social security costs 10.8 9.2 Other pension costs (note 21) 4.6 4.3 Share-based payments (note 26) 1.1 1.3

93.8 85.0

2018Number

2017Number

Production 1,144 1,234 Sales and marketing 26 27 Administration and support services 665 658 Engineering and product development 183 179

2,018 2,098

5. Directors’ emoluments2018

£m2017

£m

DirectorsAggregate emoluments 2.1 1.6 Aggregate amounts receivable under LTIPs 0.8 1.5

2.9 3.1

Further information is disclosed in the Directors’ Remuneration Report on pages 59 to 68.


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6. Special itemsTo improve the understanding of the Group’s financial performance, the following items, which do not reflect the underlying performance, are classified as special items:

Total2018

£m

Total2017

£m

Amortisation of acquired intangibles (12.1) (13.0)Reorganisation costs (4.6) (0.5)Impairment of assets (4.2) – Advisory and acquisition costs – (0.2)Special items before taxation (20.9) (13.7)

Tax on special items 4.6 3.6 Special tax item — deferred tax credit as a result of overseas Corporate rate change 0.8 0.5 Special tax item — other prior year adjustments – 0.4 Special items after taxation (15.5) (9.2)

• Amortisation of acquired intangibles represents the charge in relation to Aesica (acquired in 2014) of £11.3m (FY2017: £12.2m) and £0.8m (FY2017: £0.8m) in relation to The Medical House (acquired in 2009)

• Reorganisation costs of £4.6m relate to the successful streamlining of elements of the business completed during the year

• Impairment of assets relates to a write-down of the carrying values of assets due to a lack of future anticipated economic value

• Advisory and acquisition costs of £0.2m in the prior year include advisory costs in relation to the evaluation of potential transactions

• A special tax item of £0.8m (FY2017: £0.5m) was recognised relating to the recalculation of the Group’s deferred tax assets and liabilities using lower overseas Corporate tax rates

7. Finance income2018

£m2017

£m

Interest on deposits 0.2 0.1 Finance income 0.2 0.1

8. Finance costs2018

£m2017

£m

Interest on bank overdrafts and loans plus amortised fees (3.2) (3.0)Finance costs (3.2) (3.0)

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9. Other finance costs2018

£m2017

£m

Net interest cost on defined benefit schemes (note 21) (1.1) (0.8)Foreign exchange losses (0.4) (0.7)Other finance costs (1.5) (1.5)

10. Taxation Taxation charge based on profits for the yearThe major components of income tax charge are:

2018£m

2017£m

Current taxUK corporation tax at 19.0% (2017: 19.92%) 0.8 2.0 Adjustments in respect of prior periods 0.1 (1.1)Foreign tax:Current period 3.0 1.4 Adjustments in respect of prior periods 0.2 0.1

4.1 2.4

Deferred income taxUK origination and reversal of timing differences (2.1) (1.9)Adjustments in respect of prior periods – (0.7)Impact of change in tax rates (0.8) (0.5)

(2.9) (3.1)Income tax charge/(credit) reported in the consolidated income statement 1.2 (0.7)The tax charge/(credit) is analysed between:Tax on profit before special items 6.6 3.8 Tax on special items (4.6) (3.6)Special tax item — other prior year adjustments – (0.4)Special tax item — deferred tax credit as a result of the UK Corporate rate change (0.8) (0.5)

1.2 (0.7)Tax on items taken to equityCurrent tax:Exchange movements recognised in reserves 0.1 0.1 Share-based payments 0.1 0.1

0.2 0.2Deferred tax:Actuarial (gains)/losses on pension scheme (5.6) 3.3 Share-based payments 0.1 (0.2)Impact of change in tax rates 0.6 (0.4)

(4.9) 2.7 Total tax credited to equity (4.7) 2.9


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10. Taxation continuedReconciliation between tax expense and the Group’s profit on ordinary activities before taxationThe reconciliation of the UK statutory tax charge to the Group’s profit on ordinary activities before taxation is as follows:

2018£m

2017£m

Profit before tax 17.3 21.9 Taxation charge at UK corporation tax rate of 19.0% (2017: 19.92%) 3.3 4.3 Adjustments in respect of prior periods 0.3 (1.7)Tax effect of non-deductible or non-taxable items – (0.3)Effect of patent box (1.9) (1.7)Effect of higher foreign tax rates 0.3 (0.3)Deferred tax on share-based payments 0.1 – Movement in unprovided deferred tax – (0.5)Special tax item — rate change adjustment (0.9) (0.5)

1.2 (0.7)

The adjustments in respect of prior periods above are mainly as a result of a review of the utilisation of Group losses.

Factors affecting future tax chargeIn October 2017, the European Commission opened a state aid investigation into the Group Financing Exemption in the UK Controlled Foreign Company rules which were introduced into legislation in 2013. In common with other UK-based international companies whose arrangements are in line with current UK CFC legislation, the Group may be affected by the outcome of this investigation. If the preliminary findings of the European Commission’s investigation into the UK legislation are upheld, the Group calculates its maximum potential liability at the balance sheet date to be approximately £0.8m. No provision is considered to be necessary at this stage but the Group will continue to monitor developments.

Unrecognised tax losses The Group has capital losses which arose in the UK of £22.7m (2017: £22.8m) that are available for offset against future chargeable gains in the UK. Deferred tax assets have not been recognised in respect of these losses as it is not reasonably foreseeable that these will be utilised.

Deferred tax assets of £2.4m (2017: £2.0m) in respect of tax losses carried forward have not been recognised due to insufficient certainty over their recoverability. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

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10. Taxation continuedDeferred tax

2018£m

2017£m

Deferred tax liabilitiesAccelerated tax depreciation (10.4) (10.5)Intangibles (11.0) (14.4)

(21.4) (24.9)Deferred tax assetsTax losses 7.2 7.3 Less not recognised (6.3) (6.1)Tax losses recognised 0.9 1.2 Share-based payments 1.0 1.0 Provisions and deferred income 0.8 1.3 Intangibles – 0.1 Retirement benefit obligations 2.5 7.5

5.2 11.1 Assets 5.2 11.1 Liabilities (21.4) (24.9)Net deferred tax liability (16.2) (13.8)Provision for deferred taxAt 1 May (13.8) (18.6)Adjustments in respect of prior periods – 0.7 Charged to the income statement:– Retirement benefit obligations (0.2) (0.3)– Provisions – (0.6)– Accelerated capital allowances (0.5) (0.7)– Losses (0.2) – – Intangible assets 3.0 3.5 Impact of change in tax rates in income statement 0.8 0.5 Impact of change in tax rates in equity 0.6 (0.4)(Credit)/charge to equity (5.5) 3.1 Exchange differences (0.4) (1.0)At 30 April (16.2) (13.8)


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11. Earnings per shareBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the Employee Share Ownership Trust which are treated as cancelled.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the year, and contingently issuable shares under the Long-Term Incentive Plan.

2018£m

2017£m

EarningsBasic and diluted:Profit for the year — attributable to ordinary shareholders 16.1 22.6 Add back: Special items after taxation 15.5 9.2 Adjusted earnings 31.6 31.8

2018Number

2017Number

Number of sharesWeighted average number of ordinary shares in issue 49,257,383 49,181,247 Weighted average number of shares owned by the Employee Share Ownership Trust (300,069) (300,569)Average number of ordinary shares in issue for basic earnings 48,957,314 48,880,678 Dilutive impact of share options outstanding 390,802 504,543 Diluted weighted average number of ordinary shares in issue 49,348,116 49,385,221

2018 Pence

2017 Pence

Earnings per shareBasic:Adjusted 64.5 65.1Unadjusted 32.9 46.2Diluted:Adjusted 63.9 64.4Unadjusted 32.7 45.7

No options over ordinary shares have been exercised since 30 April 2018 to the date of this report.

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12. DividendsDividends declared and paid during the year:

2018£m

2017 £m

Final dividend for FY2017 of 13.21p per share (FY2017: final dividend for FY2016 of 12.56p per share) 6.5 6.1 Interim dividend paid in FY2018 of 7.44p per share (FY2017: 7.09p) 3.6 3.5

10.1 9.6

In addition, the directors are proposing a final dividend in respect of the year ended 30 April 2018 of 13.56p per share, at an estimated total cost of £6.6m. If approved by shareholders at the Annual General Meeting to be held on 5 September 2018, the final dividend will be paid on 26 October 2018 to shareholders on the register on 28 September 2018.

13. Property, plant and equipment

Land and buildings

£m

Plant, equipment

and vehicles£m

Assets under construction

£m Total

£mCostAt 1 May 2017 82.4 149.5 21.2 253.1 Effects of exchange rate changes 0.6 0.8 – 1.4 Additions 1.6 4.4 14.4 20.4 Transfers 1.1 14.8 (16.2) (0.3)Disposals – (2.3) – (2.3)At 30 April 2018 85.7 167.2 19.4 272.3 Accumulated depreciation and impairmentAt 1 May 2017 19.5 90.0 – 109.5 Effects of exchange rate changes 0.1 0.2 – 0.3 Charge for the year 2.1 11.0 – 13.1 Impairment – 3.8 – 3.8 Disposals – (2.1) – (2.1)At 30 April 2018 21.7 102.9 – 124.6 Net book amount at 30 April 2018 64.0 64.3 19.4 147.7

Transfers relate to amounts transferred from assets under construction to intangible assets during the year.


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13. Property, plant and equipment continued

Land and buildings

£m

Plant, equipment

and vehicles£m


£m Total

£m

CostAt 1 May 2016 81.3 136.9 16.9 235.1 Effects of exchange rate changes 0.6 1.6 (0.2) 2.0 Additions 0.1 3.9 13.9 17.9 Transfers 0.4 8.8 (9.2) – Disposals – (1.7) (0.2) (1.9)At 30 April 2017 82.4 149.5 21.2 253.1 Accumulated depreciation and impairmentAt 1 May 2016 17.2 81.2 – 98.4 Effects of exchange rate changes 0.1 0.6 – 0.7 Charge for the year 2.2 9.9 – 12.1 Disposals – (1.7) – (1.7)At 30 April 2017 19.5 90.0 – 109.5 Net book amount at 30 April 2017 62.9 59.5 21.2 143.6

14. Goodwill

£mCost At 1 May 2016 122.6 Effects of exchange rate changes 4.2 At 30 April 2017 126.8 Effects of exchange rate changes 2.8 At 30 April 2018 129.6

The carrying value of goodwill is made up of balances arising on the acquisitions of The Medical House and of Aesica.

Goodwill acquired through business combinations is allocated to Bespak and Aesica CGUs (cash-generating units) for impairment testing. Goodwill is not amortised but is tested for impairment annually. Value in use calculations are utilised to calculate the recoverable amounts. Value in use is calculated as the net present value of the projected, risk-adjusted, pre-tax cash flows of the CGU in which the goodwill is contained.

The discount rate applied comprises the Group’s post-tax weighted average cost of capital adjusted to reflect the impact of the time value of money, tax effects and risks associated with the CGUs. This was calculated at 8% (2017: 8%) in respect of both Bespak and Aesica. The value in use calculations for each CGU are based on the Group’s strategic plan incorporating three years from FY2019 to FY2021 which was approved by the Board and takes into account both past performance and expectations for future market development. Cash flows beyond this period were extrapolated using an annual growth rate of approximately 2% (FY2017: 2%), which was selected prudently below the Group’s estimate of the long-term average growth rate in the UK and which does not exceed the long-term average growth rate for the sectors in which the CGUs operate.

The directors believe that no reasonably foreseeable changes to key assumptions would result in an impairment of goodwill and are confident that the amount of goodwill carried for each of The Medical House and Aesica, as well as the assumptions used in estimating their fair values, are appropriate.

Critical judgements concerning goodwill impairment considerations are disclosed in note 1.

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15. Other intangible assets

Developmentcosts

£m

Computer software

£m

Patented and

unpatented technology and know-

how£m

Customer contracts

and relationships

£m Total

£m

CostAt 1 May 2017 – 2.5 3.0 93.3 98.8 Effects of exchange rate changes – – – 2.4 2.4 Additions 0.7 0.5 0.1 – 1.3 Transfers – 0.3 – – 0.3 At 30 April 2018 0.7 3.3 3.1 95.7 102.8 Accumulated amortisationAt 1 May 2017 – 2.0 2.2 37.5 41.7 Effects of exchange rate changes – – – 1.0 1.0 Charge for the year – 0.4 – 12.1 12.5 At 30 April 2018 – 2.4 2.2 50.6 55.2 Net book amount at 30 April 2018 0.7 0.9 0.9 45.1 47.6 CostAt 1 May 2016 – 2.4 3.0 89.4 94.8 Effects of exchange rate changes – – – 3.9 3.9 Additions – 0.1 – – 0.1 At 30 April 2017 – 2.5 3.0 93.3 98.8 Accumulated amortisationAt 1 May 2016 – 1.7 2.1 23.7 27.5 Effects of exchange rate changes – – – 0.8 0.8 Charge for the year – 0.3 0.1 13.0 13.4 At 30 April 2017 – 2.0 2.2 37.5 41.7 Net book amount at 30 April 2017 – 0.5 0.8 55.8 57.1

Customer contracts and relationships include intangible assets acquired through business combinations and no indicators of impairment were identified in either the current or prior year.


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16. Investments

Equity investments2018

£m2017

£m

Cost and net book value at 1 May 11.4 8.3 Additions – 3.1 Net book value at 30 April 11.4 11.4

Investments relate to an 11.3% investment in Oxular Ltd, a retinal therapeutics company and a 15.2% shareholding in Atlas Genetics Ltd, a healthcare technology company with an ultra-rapid point of care diagnostics platform.

The Group has accounted for both Oxular Ltd and Atlas Genetics Ltd as equity investments and concluded that their cost represents an appropriate fair value.

17. Inventories2018

£m2017

£m

Raw materials and consumables 19.5 17.4 Work in progress 9.3 9.4 Finished goods 6.4 7.6

35.2 34.4

18. Trade and other receivables2018

£m2017

£m

Trade receivables 56.2 44.5 Less: provision for impairment of trade receivables (0.7) (1.3)Trade receivables — net 55.5 43.2 Other receivables 6.1 5.7 Other taxation 2.8 2.0 Prepayments and accrued income 8.2 4.0

72.6 54.9 Due after more than one year 3.8 – Due within one year 68.8 54.9

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

As at 30 April 2018, trade receivables of £5.1m (2017: £3.5m) were overdue.

Amounts due after more than one year relate to finance lease arrangements that the Group has entered into as a lessor for plant and equipment. The finance lease receivable at 30 April 2018 was neither past due nor impaired.

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18. Trade and other receivables continuedThe ageing of overdue receivables is as follows:

2018£m

2017£m

Up to 3 months 4.2 2.3 3 to 6 months 0.6 0.7 Over 6 months 0.3 0.5

5.1 3.5

The credit quality of receivables that are neither overdue nor impaired is considered to be good.

Movements on the Group provision for impairment of trade receivables are as follows:

2018£m

2017£m

At 1 May 1.3 1.6 Provision for impairment of receivables – 0.1 Receivables written off in the period – (0.4)Subsequent recoveries of amounts provided for (0.6) – At 30 April 0.7 1.3

Amounts are written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain any impaired items.

19. Cash and cash equivalents2018

£m2017

£m

Cash at bank and in hand 21.4 22.2 21.4 22.2

20. Trade and other payables2018

£m2017

£m

Trade payables 36.8 30.2 Bank overdrafts – 2.8 Other taxation and social security 2.3 2.2 Other payables 7.4 9.1 Accruals and deferred income 26.6 31.3

73.1 75.6 Due after more than one year 1.7 8.5 Due within one year 71.4 67.1


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21. Pensions and other post-employment benefitsDuring the year, the Group operated four pension or similar employment benefit arrangements (‘the schemes): one in the UK, one in Italy and two in Germany. Pension benefits are provided either by defined benefit schemes, whereby retirement benefits are based on employee pensionable remuneration and length of service, or by defined contribution schemes, whereby retirement benefits are determined by the value of funds arising from contributions paid in respect of each employee. In Germany the Group operates a long service award scheme, whereby monetary awards are earned based on employee tenure.

The costs associated with these schemes are shown in the table below:

Pension costs2018

£m 2017

£m

UK and overseas defined benefit schemes 0.1 0.1 UK defined contribution schemes 4.5 4.2 Total charged to operating expenses (note 4) 4.6 4.3 Net interest included in other finance income (note 9) 1.1 0.8 Total cost of pensions charged to income statement 5.7 5.1

In 2002, the Bespak Retirement Benefits Scheme (a defined benefit pension scheme) was closed to new members. Furthermore, from 31 March 2016 the Scheme was closed to further accrual via a deed of amendment between the Group and the Trust. Following the Scheme closure, all former active members became deferred members and the provision of pension benefits was migrated to a defined contribution pension scheme which is also available to new employees.

As at 30 April 2018, the Bespak IAS 19 deficit was £10.4m compared with £40.6m as at 30 April 2017. The significant decrease in the deficit was primarily due to changes in the demographic assumptions in line with the recently agreed triennial valuation plus an increase in discount rates year over year.

The latest triennial actuarial valuation of the Bespak Pension Scheme was performed by an independent actuary for the trustees of the scheme and was carried out as at 30 April 2017. In April 2018, the Group and the Trustees agreed this actuarial valuation which recorded a deficit of £37.3m as at the valuation date. As part of the agreement, the Group undertook to make deficit recovery contributions at the following rates:

• November 2017 – October 2019: £2.5m per annum• November 2019 – October 2021: £3.0m per annum• November 2021 – November 2029: £3.5m per annum

Pension deficit contributions for FY2018 totalled £2.0m for the Bespak scheme, comprising 6 months at the previous contribution requirement of £1.5m per annum and 6 months at the revised contribution requirement of £2.5m per annum as detailed above. Any contributions in excess of the deficit are ultimately refundable to the Group under the Scheme rules. The Group also made contributions of £0.1m in respect of overseas schemes.

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21. Pensions and other post-employment benefits continuedThe Group operated three other pension or similar employment benefit schemes during the year, two by Aesica Pharmaceuticals GmbH in Germany and one by Aesica Pharmaceuticals Srl in Italy. The three schemes are, respectively, the Retirement Benefit Obligations Scheme (the “RBO”), the Long Term Service Scheme (the “Jubilee”) and the Aesica Italy Scheme. The RBO Scheme is a defined benefit scheme which is closed to new members whereas the Jubilee long service award scheme continues to be open to all employees of Aesica Pharmaceuticals GmbH. The Aesica Italy Scheme is now a defined contribution scheme open to all employees of Aesica Pharmaceuticals Srl and Consort Medical Srl, with a closed, legacy, defined benefit section. The defined benefit elements of these overseas schemes had a total net IAS 19 deficit of £4.3m at 30 April 2018 (30 April 2017: £4.0m deficit).

The assets of each scheme are held in separate trustee-administered funds to meet long-term pension and similar liabilities to past and present employees. The trustees of the schemes are required to act in the best interests of the schemes’ beneficiaries. The Bespak scheme has a policy that one-third of all trustees are to be nominated by members of the scheme, there is not such a provision for either the Aesica GmbH or Italy schemes.

Contributions to each of the Group’s defined benefit schemes are determined in accordance with the advice of an independent, professionally qualified actuary. Pension costs of defined benefit schemes for accounting purposes have been assessed in accordance with independent actuarial advice, using the projected unit method. Liabilities are assessed annually in accordance with the advice of an independent actuary.

The components of the costs of the defined benefits schemes are shown in the following table:

Components of defined benefit pension cost2018

£m 2017

£m

Current service cost 0.1 0.1 Net interest expense 1.1 0.8 Total defined benefit pension cost recognised in the income statement 1.2 0.9 Actuarial (gains)/losses immediately recognised (29.2) 18.3 Total pension (income)/expense recognised in the statement of comprehensive income (29.2) 18.3 Cumulative amount of actuarial losses immediately recognised 17.5 46.7


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21. Pensions and other post-employment benefits continuedThe assets and liabilities of the Bespak and Aesica defined benefit schemes are calculated in accordance with IAS19 Employee Benefits (Revised) and are set out in the table below:

Present value of obligation

£m

Fair value of plan assets

£m Total

£mAt 1 May 2017 154.6 (110.0) 44.6 Current service cost 0.1 – 0.1 Interest expense/(income) (note 9) 4.0 (2.9) 1.1 Amount charged/(credited) to the income statement 4.1 (2.9) 1.2 Return on plan assets (excluding amounts included within interest) – 1.1 1.1 Effect of demographic changes (9.2) – (9.2)Loss from changes in financial assumptions (12.3) – (12.3)Effect of experience adjustments (8.8) – (8.8)Amount credited to equity (30.3) 1.1 (29.2)Contributions:– employers (0.2) (1.9) (2.1)Payments from plans:– benefit payments (5.3) 5.3 – Effects of foreign exchange rates 0.2 – 0.2 At 30 April 2018 123.1 (108.4) 14.7 At 1 May 2016 119.5 (92.3) 27.2 Current service cost 0.1 – 0.1 Interest expense/(income) (note 9) 3.9 (3.1) 0.8 Amount charged/(credited) to the income statement 4.0 (3.1) 0.9 Return on plan assets (excluding amounts included within interest) – (14.5) (14.5)Loss from changes in financial assumptions 32.8 – 32.8 Amount credited to equity 32.8 (14.5) 18.3 Contributions:– employers (0.1) (1.9) (2.0)Payments from plans– benefit payments (1.8) 1.8 – Effects of foreign exchange rates 0.2 – 0.2 At 30 April 2017 154.6 (110.0) 44.6

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21. Pensions and other post-employment benefits continuedDisclosure of principal assumptionsThe principal actuarial assumptions adopted at the balance sheet date for the various schemes were as follows:

Aesica BespakItaly2018

Germany*2018

Italy2017

Germany*2017 2018 2017

Discount rate 2.00% p.a. 1.85% p.a. 1.75% p.a. 2.05% p.a. 2.8% p.a. 2.7% p.a. Inflation assumption 1.5% p.a. 2.0% p.a. 1.5% p.a. 2.0% p.a. n/a n/aFuture RPI inflation n/a n/a n/a n/a 3.1% p.a. 3.5% p.a.Future CPI inflation n/a n/a n/a n/a 2.1% p.a. 2.5% p.a.Future salary increases n/a 3.0% p.a. n/a 2.5% p.a. 2.6% p.a. 3.0% p.a.Rate of pension increases 2.0% p.a. 2.0% p.a.RPI inflation capped at 5% p.a. n/a n/a n/a n/a 2.9% p.a. 3.4% p.a.RPI inflation capped at 5% p.a. with a minimum of 3% p.a. n/a n/a n/a n/a 3.6% p.a. 3.8% p.a.RPI inflation capped at 2.5% p.a. n/a n/a n/a n/a 2.0% p.a. 2.2% p.a.

* Applies to the RBO scheme only.

Sensitivity analysis of the principal assumptions used to measure the Bespak and Aesica scheme liabilitiesThe sensitivity of each scheme’s liabilities to changes in the principal assumptions used to measure these liabilities is illustrated below. The illustrations consider the single change shown with the other assumptions assumed to be unchanged. In practice, changes in one assumption may or may not be accompanied by offsetting changes in another assumption.

The total Group liability is the difference between the totals of each scheme’s liabilities and each scheme’s assets. Certain changes in the assumptions will be as a result of changes in market yields. Where this is the case, the market value of scheme assets may change simultaneously, which may or may not offset the change in assumptions. For example, a fall in interest rates will increase each scheme’s liability, but may also trigger an offsetting increase in the market value of assets so that the net effect on the total Group liability is reduced.

Bespak schemeAssumption Change in assumption Impact on scheme liabilitiesDiscount rate Decrease by 0.25% p.a. Increase by 5.4%Rate of inflation increase Decrease by 0.25% p.a. Decrease by 3.3%Rate of inflation increase Increase by 0.25% p.a. Increase by 3.4%Rate of salary increase Decrease by 0.25% p.a. Decrease by 0.8%Rate of salary increase Increase by 0.25% p.a. Increase by 0.8%Rate of mortality Members assumed to live one year longer Increase by 3.2%

Aesica schemesAssumption Change in assumption Impact on scheme liabilitiesDiscount rate Increase by 0.5% p.a. Decrease by 7.3%Discount rate Decrease by 0.5% p.a. Increase by 8.2%Rate of inflation and salary increase Decrease by 0.5% p.a. Decrease by 5.6%Rate of inflation and salary increase Increase by 0.5% p.a. Increase by 6.2%


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21. Pensions and other post-employment benefits continuedFurther details relating to the Bespak scheme are presented below as it is the largest of the Group’s schemes.

2018 2017

Asset categoryTotal assets

£m

Of which quoted

£m %Total assets

£m

Of which quoted

£m %

Debt instruments 46.9 – 43.6 50.1 – 46.0 Equity instruments 59.2 14.3 55.1 58.8 15.8 53.9 Cash and cash equivalents 1.4 – 1.3 0.1 – 0.1 Overall 107.5 14.3 100.0 109.0 15.8 100.0

Nature and extent of the risks arising from financial instruments held by the Bespak schemeInvestments are spread across a range of bonds, UK and overseas equities and hedge funds/diversified growth funds. Spreading the investments in this way reduces the risk of a sharp fall in one particular market having a substantial impact on the Scheme. The Trustees have a substantial holding of equity and hedge fund investments. The overall target is for 55% of the Scheme’s assets to be invested in a globally diversified portfolio of these funds and this target split 10% UK equities, 30% overseas equities, 5% emerging markets equities and 10% diversified growth funds.

How the liabilities arising from the Bespak scheme are measuredThe Group provides retirement benefits via the Bespak scheme to some of its former employees and approximately 20% of current UK employees. The level of retirement benefit is linked to final pensionable salary and period of service as a scheme member.

The projected liabilities of the scheme are apportioned between members’ past and future service using the projected unit actuarial cost method. The deficit reported in the consolidated balance sheet is the difference between the projected liability allocated to past service (the defined benefit obligation) and the market value of the assets of the Scheme. The defined benefit obligation makes allowance for future salary growth.

Future funding obligations in relation to the Bespak schemeThe trustees have selected a funding target based on the Scheme being closed to new members, with the link to final salaries being maintained. The agreed funding objective is to reach, and then maintain, assets equal to 100% of the value of the projected past service liabilities, assessed on an ongoing basis, allowing for future pensionable salary increases for active members.

Current life expectancies (in years) underlying the value of the accrued liabilities

2018 2017

Life expectancy at age 65 Male Female Male Female

Member currently aged 65 21.6 24.3 23.0 25.9 Member currently aged 45 23.0 25.8 24.8 27.9

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22. Provisions and other liabilitiesRestructuring

and other provisions

£m

Employeebenefits

£mTotal

£m

At 1 May 2017 2.2 0.6 2.8 Provided in the year 3.2 0.6 3.8 Utilised in the year (1.0) (0.2) (1.2)Released in the year (0.6) (0.1) (0.7)At 30 April 2018 3.8 0.9 4.7 Analysis of total provisions:Current 3.0 0.4 3.4 Non-current 0.8 0.5 1.3 Total 3.8 0.9 4.7

The restructuring and other provisions balance at 30 April 2018 comprises mainly environmental and employee severance and onerous property leases associated with business streamlining and restructuring.

Employee benefits represents a provision for national insurance contributions on share options and other share-based payments.

For all provisions, the amounts provided represent management’s best estimate of the most likely outcome. The split of provisions between current and non-current reflects the expected timing of the associated cash outflows.

23. Net debt 2018

£m 2017

£m

Current assets:Cash and cash equivalents (note 19) 21.4 22.2

21.4 22.2 Current liabilities:Bank overdrafts (note 20) – (2.8)

– (2.8)Borrowings:Interest bearing loans and borrowings (117.3) (113.0)Unamortised facility fees 0.4 1.0 Net borrowings (116.9) (112.0)Net debt (95.5) (92.6)

The Group has a c. £160m multi-currency revolving credit facility (£168.6m at year end exchange rates), plus an uncommitted £65m accordion facility, with Barclays, Lloyds, RBS and Santander. The revolving credit facility expires in September 2019. The Group also has uncommitted overdraft facilities of £4.5m and £1.1m, which are in place until November 2018 and September 2019 respectively.

While the revolving credit facility does not expire for more than one year, the debt within this is disclosed as less than one year as it is drawn only for one-month periods to minimise the debt drawn relative to the Group’s needs, and to minimise the interest payable. Interest on the revolving credit facility is charged at LIBOR plus a margin of between 1.2% and 2.2%, depending upon the ratio of net debt to EBITDA and on UK overdrafts at either 1.75% above UK base rate or at the prevailing rate per the revolving credit facility.


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23. Net debt continuedThe undrawn facilities are unsecured. The bank loans and overdrafts are subject to cross-guarantees between Group undertakings.

The Group anticipates renewing its banking facility during the year ended 30 April 2019 in advance of the above expiry date and has had encouraging initial discussions with existing and potential new lenders.

Reconciliation of net cash flow to movement in net debt

2018£m

2017£m

Net debt at the beginning of the year (92.6) (97.0)Net increase in cash and short-term borrowings (1.3) 7.8 Effects of exchange rate changes (1.0) (3.1)Amortisation of facility fees (0.5) (0.3)Net debt at the end of the year (95.5) (92.6)

24. Share capital and share premium

Group and CompanyIssued

Number

Ordinary shares

of 10p each£m

Sharepremium

£m

Share capital issued and fully paidAt 1 May 2017 49,212,037 4.9 138.0 Issued under share option schemes 72,589 – 0.5 At 30 April 2018 49,284,626 4.9 138.5

30 April2018

30 April2017

Number of shares issuable under outstanding options 747,565 884,017

During the year, 72,589 (2017: 81,037) ordinary shares of 10p were issued as a result of exercises under the Consort Savings Related Share Option Scheme for total consideration of £0.5m (2017: £0.6m). The Group purchases its own shares using an Employee Share Ownership Trust (“ESOT”) to satisfy entitlements under the Group’s Long-Term Incentive Plan. During the year, the Group purchased 203,882 shares at market value. The cost of the shares held by the ESOT is deducted from retained earnings. The ESOT is financed by a repayable-on-demand loan from the Company of £16.0m (2017: £13.8m). As at 30 April 2018, the ESOT held a total of 300,579 ordinary shares of 10p (2017: 298,888 shares) at a cost of £3.0m (2017: £2.8m) and market value of £2.3m (2017: £2.3m).

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25. Financial instruments and related disclosuresFinancial risk managementThe Group manages and monitors its external and internal funding requirements and financial risks in support of corporate objectives. Treasury activities are governed by policies and procedures approved by the Board and monitored by the Group.

The Group maintains treasury control systems and procedures to monitor interest rate, foreign exchange, credit and liquidity risks.

The Group uses a variety of financial instruments, including derivatives, to finance and to manage market risks of its operations. Financial instruments include cash and liquid resources, borrowings and forward foreign exchange contracts.

Liquid assets surplus to the immediate operating requirements of Group undertakings are invested and managed centrally.

External borrowings are managed centrally and comprise a combination of long and short-term debt finance.

The Group does not hold or issue derivative financial instruments for speculative trading purposes and its treasury policies specifically prohibit such activity. All transactions in financial instruments are undertaken to manage the risks arising from underlying business activities.

Capital managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders and to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Selling margins are sufficient to cover normal operating costs and the Group’s operating subsidiaries are cash-generative. None of the entities in the Group are subject to externally imposed capital requirements. Operating cash flow is used to fund investment in new product development as well as to make the routine outflows of capital expenditure, tax, dividends and repayment of maturing debt.

The Group’s policy is to borrow centrally to meet anticipated funding requirements.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as borrowings less cash and cash equivalents and prepaid facility fees. Total capital is calculated as total equity as shown in the consolidated balance sheet plus net debt.

As at 30 April 2018, the Group is in a net debt position of £95.5m (30 April 2017: £92.6m), see note 23.

The Group monitors two ratios under its banking covenants, being net debt/EBITDA and EBITDA interest cover. These measures were ahead of target when tested at 31 October 2017 and 30 April 2018.

Fair value of financial assets and liabilitiesThe table entitled “Fair value of financial assets and liabilities” presents the carrying amount and the fair values of the Group’s financial assets and liabilities under IFRS. Where available, market values have been used to determine fair values. Where market values are not available, fair values are determined using the prevailing interest and exchange rates.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:• Currency exchange contracts – based on market prices and exchange rates at the balance sheet date• Contingent consideration – the discounted value of anticipated future receipts

The fair value of other assets and liabilities approximates to the carrying amount reported in the balance sheet.


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25. Financial instruments and related disclosures continuedFair value and cash flow hedging activitiesAll derivative financial instruments are recognised as assets or liabilities in the balance sheet at fair value. Gains and losses are recognised in the consolidated income statement unless they are designated as fair value hedging instruments and tested to be effective under IAS 39 - Financial Instruments: Recognition and Measurement, in which case the element of gains and losses that fulfil the hedge effectiveness criteria are taken directly to equity.

The Group’s hedging strategy is unchanged in respect of covering the transactional risk of foreign currency sales and purchases. In respect of the translational risk on the net investment in foreign subsidiaries, the Group has utilised a hedge of net investments in foreign operations. The Group uses a Euro loan, which had a carrying value of £27.9m at the year end (2017: £29.6m), as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries.

Interest rate risk managementThe Group’s borrowings are arranged at floating rates, thus potentially exposing the Group to interest rate risk, against which, in the past, the Group has sought to protect itself through interest rate swaps. Although the Group is currently in a net debt position, no interest rate swaps are held as the Group was not subject to any significant movements in these rates during the period and current expectations do not indicate significant changes in this in the near future. This will continue to be kept under review.

Foreign exchange risk managementThe Group’s principal currency exposure is movement between Sterling and the Euro and the movement between Sterling and the US Dollar.

Transactional exposureThe Group uses forward contracts to hedge a proportion of forecast foreign currency transactional exposure, generally extending up to 12 months. At 30 April 2018, the Group held forward contracts to hedge the equivalent of £18.6m of forecast foreign currency transaction exposures (2017: £23.1m). The fair value of the forward exchange contracts was a liability of £0.2m at 30 April 2018 (2017: liability of £0.2m). The Group currently does not designate these forward contracts as cash flow hedges and so gains and losses are recognised in the income statement.

The primary transactional exposure for the Group is in the UK businesses where transactions are denominated in USD and Euro. A 10% decline in Sterling against USD and Euro (which is considered reasonably possible) would increase operating profit and equity by £2.1m (2017: £1.9m) on an unhedged basis. A 10% increase in the value of Sterling (which is considered reasonably possible) would have a similar but opposite effect.

Translational exposureAs a result of the Group’s German and Italian Euro denominated operations, it has a foreign currency translation exposure to the Euro whereby a 10¢ weakening in the Euro:GBP exchange rate would decrease revenue by £8.4m (2017: £7.4m) and EBIT by £1.1m (2017: £1.1m).

Committed facilitiesAs explained in note 23, the Group has committed facilities available at floating rates which expire in September 2019 and overdraft facilities that expire within one year.

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25. Financial instruments and related disclosures continuedMarket risk of financial assetsThe Group invests centrally managed liquid assets in short-term investments with banks at floating interest rates. These investments are classified as cash and cash equivalents.

Credit riskThe Group is exposed to a concentration of credit risk in respect of its major customers such that, if one or more of them is affected by financial difficulty, it could materially and adversely affect the Group’s financial results. However, the Group generally does not expect its customers to fail to meet their obligations.

The Group does not believe that it is exposed to major concentrations of credit risk on other classes of financial instruments. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but does not expect any counterparties to fail to meet their obligations.

The Group applies Board-approved limits to the amount of credit exposure to any one counterparty and employs strict minimum creditworthiness criteria as to the choice of counterparty.

Liquidity riskThe Group operates internationally, primarily through subsidiary companies established in the markets in which the Group trades. Selling margins are sufficient to exceed normal operating costs and the Group’s main operating subsidiaries are cash-generative.

Operating cash flow is used to fund investment in the research and development of new products as well as routine outflows of capital expenditure, tax, dividends and repayment of maturing debt. The Group may, from time to time, have additional demands for finance such as acquisitions.

Fair value of financial assets and liabilitiesThe following table sets out the classification of the Group’s financial assets and liabilities. Receivables and payables have been included to the extent that they are classified as financial assets and liabilities in accordance with IAS 32 Financial Instruments: Presentation. Provisions have been included where there is a contractual obligation to settle in cash.

30 April 2018

£m

30 April 2017

£m

Financial assetsCash and cash equivalents (note 19) 21.4 22.2 Trade receivables (note 18) 55.5 43.2 Other receivables 12.2 8.1 Total loans and receivables 67.7 51.3 Equity investments (note 16) 11.4 11.4 Total available-for-sale financial assets 11.4 11.4

Financial liabilitiesTrade payables (note 20) (36.8) (30.2)Bank overdrafts (note 20) – (2.8)Other creditors and accruals (22.8) (24.7)Interest bearing loans and borrowings (note 23) (117.3) (113.0)Total amortised cost (176.9) (170.7)

Fair value through profit and loss — currency exchange contracts (0.2) (0.2)

All financial liabilities have a contractual maturity date that is less than 12 months from the balance sheet date.


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25. Financial instruments and related disclosures continuedHedge of net investments in foreign operationsIncluded in loans at 30 April 2018 was a borrowing of £27.9m (2017: £29.6m) which has been designated as a hedge of the net investments in the two subsidiaries in Italy and Germany, Aesica Pharmaceuticals GmbH and Aesica Pharmaceuticals Srl. Gains or losses on the retranslation of this borrowing are transferred to the statement of other comprehensive income to offset any gains or losses on translation of the net investments in the subsidiaries. The net investment hedge remained effective throughout the year ended 30 April 2018.

The equity investments in Atlas Genetics Ltd and Oxular Ltd are unquoted investments and held at their fair value.

The following tables categorise the Group’s and Company’s financial assets and liabilities held at fair value by the valuation methodology applied in determining fair value. Where possible, quoted prices in active markets are used (Level 1). Where such prices are not available, the asset or liability is classified as Level 2, provided all significant inputs to the valuation model are based on observable market data. In other cases the instrument is classified as Level 3. The Company has no financial assets held at fair value through profit or loss.

Financial liabilities at fair valueAt 30 April 2018Group and Company

Level 1£m

Level 2£m

Level 3£m

Total£m

Currency exchange contracts – (0.2) – (0.2) – (0.2) – (0.2)

At 30 April 2017Group and Company

Level 1£m

Level 2£m

Level 3£m

Total£m

Currency exchange contracts – (0.2) – (0.2) – (0.2) – (0.2)

Interest rate profile of financial assets and liabilitiesThe interest rate profile of the financial assets and liabilities of the Group is as follows:

At 30 April 2018Financial assets

Cash andcash

equivalents£m

Forwardexchange contracts

£mTotal

£m

Less than one year 21.4 – 21.4 Total 21.4 – 21.4 Analysed as:Floating rate interest 21.4 – 21.4 Total interest earning 21.4 – 21.4 Total 21.4 – 21.4

At 30 April 2018Financial liabilities

Bank overdrafts

£m

Currency exchange contracts

£m

Bank borrowings

£mTotal

£mLess than one year – (0.2) (117.3) (117.5)Total – (0.2) (117.3) (117.5)Analysed as:Floating rate interest – – (117.3) (117.3)Total interest bearing – – (117.3) (117.3)Non-interest bearing – (0.2) – (0.2)Total – (0.2) (117.3) (117.5)

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25. Financial instruments and related disclosures continued

At 30 April 2017Financial assets

Cash andcash

equivalents£m

Forwardexchange contracts

£mTotal

£m

Less than one year 22.2 – 22.2 Total 22.2 – 22.2 Analysed as:Floating rate interest 22.2 – 22.2 Total interest earning 22.2 – 22.2 Total 22.2 – 22.2

At 30 April 2017Financial liabilities

Bank overdrafts

£m

Currency exchange contracts

£m

Bank borrowings

£mTotal

£m

Less than one year (2.8) (0.2) (113.0) (116.0)More than one year – – – – Total (2.8) (0.2) (113.0) (116.0)Analysed as:Floating rate interest (2.8) – (113.0) (115.8)Total interest bearing (2.8) – (113.0) (115.8)Non-interest bearing – (0.2) – (0.2)Total (2.8) (0.2) (113.0) (116.0)

Currency profile of the financial assets and liabilitiesThe currency profile of the financial assets and liabilities of the Group is as follows:

At 30 April 2018Sterling

£m

USDollar

£mEuro

£mOther

£mTotal

£mFinancial assetsCash and cash equivalents 6.8 0.8 12.2 1.6 21.4

6.8 0.8 12.2 1.6 21.4 Financial liabilitiesInterest bearing loans and borrowings (89.4) – (27.9) – (117.3)

(89.4) – (27.9) – (117.3)

At 30 April 2017Sterling

£m

USDollar

£mEuro

£mOther

£mTotal

£m

Financial assetsCash and cash equivalents 12.7 0.2 7.9 1.4 22.2

12.7 0.2 7.9 1.4 22.2 Financial liabilitiesBank overdrafts (including right of offset) (3.4) 0.5 – 0.1 (2.8)Interest bearing loans and borrowings (83.4) – (29.6) – (113.0)

(86.8) 0.5 (29.6) 0.1 (115.8)


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25. Financial instruments and related disclosures continuedBorrowing facilitiesAt 30 April, the Group had the following undrawn committed borrowing facilities:

2018£m

2017£m

Expiring within one year 5.6 2.8 Expiring beyond one year 51.3 53.6

Derivative financial instrumentsThe table below sets out the net principal amounts and fair value of derivative contracts:

Contract orunderlying

principal amount

£m

Fair value

Assets£m

Liabilities£m

At 30 April 2018Currency exchange contracts 18.6 – (0.2)Total derivative financial instruments 18.6 – (0.2)At 30 April 2017Currency exchange contracts 23.1 – (0.2)Total derivative financial instruments 23.1 – (0.2)

26. Employee share schemesShare optionsThe Group operates share award schemes whereby awards are granted to employees to acquire shares in Consort Medical plc at no cost, subject to the achievement by the Group of certain specified performance targets. It also offers savings-related share option schemes. Following the formal approval of the Performance Share Plan 2015 (“PSP”) at the Annual General Meeting in September 2015, no further awards have been made under the 2005 Long Term Incentive Plan (“LTIP”). In June 2017, awards were made under the PSP and the Defined Bonus Plan (“DBP”).

Grants of share options are normally exercisable at the end of the three-year vesting/performance period. Grants under savings-related share option schemes are normally exercisable after three years’ saving. Grants under share option schemes are normally exercisable between three and ten years from the date of grant. Options under the share option schemes are normally granted at the market price ruling at the date of grant. The majority of options under the savings-related share option schemes are now granted at the market price ruling at the date of grant.

Share options awarded to the directors are subject to performance criteria as set out in the Directors’ Remuneration Report.

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26. Employee share schemes continuedShare-based compensation recognised in the income statement

2018£m

2017£m

Staff costs 1.1 1.3 1.1 1.3

Option pricingFor the purposes of valuing options to arrive at the share-based compensation charge, the Black–Scholes option pricing model has been used. The assumptions used in the model are as follows:

SAYEscheme

2018

Risk-free interest rate 0.2%Dividend yield 1.9%Volatility 24.9%Expected lives of options granted under:Savings-related share option schemes 3 yearsWeighted average share price for grants in the year:Savings-related share option schemes – market and option price 1,044p

The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life.

Options outstandingSave As You Earn Scheme

2018 2017

Number ofoptions

Weightedaverage exercise

priceNumber of

options


price

Outstanding at 1 May 229,175 937.1p 261,775 848.4pGranted 74,594 1,044.0p 75,078 1,047.0p Exercised (69,882) 873.3p (81,037) 656.7p Forfeited (30,507) 993.0p (26,641) 929.8p Outstanding at 30 April 203,380 991.0p 229,175 937.1p Exercisable at end of year – – – –

Share Option Scheme2018 2017

Number ofoptions


priceNumber of

options


price

Outstanding at 1 May – – 11,647 785.0p Exercised – – (11,647) 686.6p Forfeited – – – – Outstanding at 30 April – – – –


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26. Employee share schemes continued

Outstanding options granted under all schemes are as follows:

Options grantedWeighted average remaining

contractual life (years)

Options granted 2018 2017 2018 2017Price at

grant date

Savings-related share option schemesJuly 2014 – 69,703 0.0 0.3 871.0p July 2015 80,447 91,195 0.3 1.3 908.0p July 2016 56,864 68,277 1.3 2.3 1,047.0p July 2017 66,069 – 2.3 – 1,044.0p Total 203,380 229,175 1.2 1.3 991.0p

Performance Share Plan (LTIP)The Group operates performance share plans whereby awards are granted to directors and senior management at no cost. The percentage of each award that vests is based upon the performance of the Group over a three-year measurement period.

Number of shares issuable2018

Number 2017

Number

Performance sharesAt 1 May 174,839 410,327 Granted 9,490 11,885 Exercised (162,249) (202,670)Forfeited (22,080) (44,703)At 30 April – 174,839

Performance Share Plan (PSP)


Number 2017

Number

Performance sharesAt 1 May 389,078 245,114 Granted 248,171 237,778 Exercised (14,593) – Forfeited (165,715) (93,814)At 30 April 456,941 389,078

Performance shares are issued at nil cost to the employee. There were 2,407 performance shares exercisable at the end of the year (2017: nil). The weighted average remaining contractual life of the performance shares in issue was 15 months (2017: 20 months).

The majority of the awards granted in the year were made in the form of an award of performance shares.

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26. Employee share schemes continuedDeferred Bonus Plan (DBP)The Group operates a Deferred Bonus Plan whereby awards are granted to directors and senior management at no cost. The percentage of each award that vests is based upon the performance of the Group over a three-year measurement period.


Number 2017

Number

Deferred bonus plan sharesAt 1 May 90,925 130,036 Granted 30,403 42,280 Exercised (28,056) (55,598)Forfeited (6,028) (25,793)At 30 April 87,244 90,925

Deferred bonus plan shares are issued at nil cost to the employee. There were no deferred bonus plan shares exercisable at the end of the year (2017: nil). The weighted average remaining contractual life of the performance shares in issue was 13 months (2017: 14 months).

During the year awards under the PSP and DBP were granted to a number of employees. The fair value per share under award at grant has been calculated using a Monte Carlo share pricing model. The assumptions used in the calculation are as follows:

FY2018Share price at grant date 1,080p Shares under option 189,309 Vesting period 3 yearsVolatility 24.9%Risk-free rate 0.21%Fair value per performance share – TSR criteria 688p Fair value per performance share – EPS criteria 1,080p

The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise.


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27. Commitments and contingent liabilities 2018

£m 2017

£m

Property, plant and equipment(i) Capital expenditure contracted for but not provided in the accounts 11.6 7.6

(ii) Commitments under operating leases:As lesseeThe future aggregate minimum lease payments under non-cancellable operating leases are as follows:No later than one year 1.6 1.7 Later than one year and no later than five years 3.9 5.0 Later than five years and no later than 25 years 0.8 1.1

6.3 7.8

The above commitments are inclusive of onerous lease provisions totalling £0.3m which are included in note 22.

As lessorThe future aggregate minimum lease rentals receivable under finance leases are as follows:No later than one year 0.5 – Later than one year and no later than five years 3.4 – Later than five years and no later than 25 years 0.4 –

4.3 –

The future aggregate minimum lease rentals receivable under finance leases are as follows:Later than one year and no later than five years 4.3 – Less unearned finance income (0.5) – Present value of minimum lease payments 3.8 – Allowance for uncollectable lease payments – –

3.8 –

(iii) Cross-guaranteesThere is a guarantee agreement from Group undertakings to Barclays Bank plc, the Royal Bank of Scotland plc, Lloyds Bank plc and Santander UK plc in respect of the Group’s borrowings. The outstanding balance of borrowings amounted to £117.3m (2017: £113.0m) at 30 April 2018.

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28. Related party transactionsThe consolidated financial statements include the financial statements of the Company and all subsidiaries listed in the following table:

Subsidiaries

Country of registration (or incorporation)

and operation

% of ordinaryshares held

bythe Company

% of ordinaryshares held

bythe Group Nature of business

Consort Medical Finance 2010 Ltd1 United Kingdom 100 100 Financial IntermediaryBespak Holdings Ltd1 United Kingdom 100 100 Non-trading companyBespak Finance Ltd1 United Kingdom 100 100 Non-trading companyConsort Medical Finance Ltd1 United Kingdom – 100 Financial IntermediaryConsort Medical Finance Ireland Ltd7 Ireland – 100 Financial IntermediaryConsort Medical GmbH2 Germany – 100 Non-trading companyConsort Medical Srl3 Italy – 100 Non-trading companyH & M Rubber Company Inc4 USA – 100 DormantBespak Europe Ltd1 United Kingdom 100 100 Drug delivery device

manufacturerIntegrated Aluminium Components Ltd1 United Kingdom – 100 Manufacturer of anodised

parts and pressingsThe Medical House Ltd1 United Kingdom 100 100 Development of disposable

auto-injector systemsThe Medical House Group Ltd1 United Kingdom – 100 Non-trading companyMedical House Products Ltd1 United Kingdom – 100 Development of disposable

auto-injector systemsMedical House (ASI) Ltd1 United Kingdom – 100 Development of disposable

auto-injector systemsHyperlyser Ltd1 United Kingdom – 100 DormantBespak, LLC5 USA – 100 Commercial servicesAesica Holdco Ltd1 United Kingdom 100 100 Non-trading companyAesica M1 Ltd1 United Kingdom – 100 Non-trading companyAesica M2 Ltd1 United Kingdom – 100 Non-trading companyAesica BC Ltd1 United Kingdom – 100 Non-trading companyAesica Pharmaceuticals Ltd1 United Kingdom – 100 Pharmaceutical ingredients/

products manufacturer Aesica Queenborough Ltd1 United Kingdom – 100 Pharmaceutical ingredients/

products manufacturer Aesica Trustee Company Ltd1 United Kingdom – 100 Non-trading companyAesica LLC 6 USA – 100 Commercial servicesAesica Formulation Development Ltd1 United Kingdom – 100 Pharmaceutical ingredients/

products manufacturer Aesica Pharmaceuticals GmbH2 Germany – 100 Pharmaceutical products/

packaging manufacturerAesica Pharmaceuticals S.r.l.3 Italy – 100 Pharmaceutical products/

packaging manufacturer

Registered addresses:1 Suite B Breakspear Park, Breakspear Way, Hemel Hempstead, HP2 4TZ, United Kingdom2 Alfred-Nobel Straße 10, 40789, Monheim, Germany3 Via Praglia 15, 10044, Pianezza (TO), Italy4 4400 Easton Commons Way, Suite 125, Columbus, OH 43219, USA5 Corporation Trust Center, 1209 Orange Street, Wilmington, Newcastle, Delaware, 19801, USA6 601 US Highway 35 North, Neptune, New Jersey, 07753, USA7 TMF Administration Services Limited, 3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland

Aesica Holdco Limited and its subsidiaries were acquired on 12 November 2014.


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28. Related party transactions continuedThe following tables provide the total amount of transactions which have been entered into with related parties for the relevant financial year:

Sale of goods and services

Purchase of goods and services

Amounts owed by related parties

Amounts owed to related parties

2018£m

2017£m

2018£m

2017£m

2018£m

2017£m

2018£m

2017£m

Related parties 1.9 1.9 – – 0.1 0.1 – –

Terms and conditions of transactions with related partiesThe sales to and purchases from related parties are made at normal market prices. Outstanding balances that relate to trading balances are unsecured, interest-free and settlement occurs in cash. Long-term loans owed to and from the Company by subsidiary undertakings generally bear market rates of interest in accordance with the intercompany loan agreements. Consort Medical plc has provided guarantees to suppliers of Integrated Aluminium Components Ltd amounting to £1.4m (FY2017: £1.7m), including a property lease that runs until 2020.

A provision of £3.1m exists against the amount due from Integrated Aluminium Components Ltd to Consort Medical plc (2017: £3.1m). No other provisions have been made against amounts from related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Outstanding balances with the Group’s pension schemes are disclosed in note 21.

Compensation of key management personnel of the GroupKey management personnel includes directors (executive and non-executive) and members of the Executive Committee.

2018£m

2017£m

Short-term employee benefits 3.1 2.8 Post-employment benefits 0.3 0.3 Share-based payments 1.0 0.9

4.4 4.0

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COMPANY BALANCE SHEETAT 30 APRIL 2018

Notes2018

£m 2017

£m

AssetsNon-current assetsProperty, plant and equipment B 0.9 0.3 Intangible assets C 0.4 – Investments D 314.9 314.9 Amounts receivable from Group undertakings E 225.2 215.2 Deferred tax assets F 0.5 0.5

541.9 530.9 Current assetsTrade and other receivables G 13.4 10.6 Current tax assets 7.8 8.2 Derivative financial instruments – 0.2 Cash and cash equivalents H 2.5 3.8

23.7 22.8 Total assets 565.6 553.7

LiabilitiesCurrent liabilitiesBorrowings (116.9) (112.0)Trade and other payables I (263.9) (260.0)Provisions and other liabilities J (0.2) (0.1)

(381.0) (372.1)Net current liabilities (357.3) (349.3)

Non-current liabilitiesTrade and other payables I (15.9) (15.9)Provisions and other liabilities J (0.3) (0.2)

(16.2) (16.1)Total liabilities (397.2) (388.2)Net assets 168.4 165.5

Shareholders’ equityShare capital 4.9 4.9 Share premium 138.5 138.0 Retained earnings 25.0 22.6 Total equity 168.4 165.5

The financial statements on pages 142 to 148 were approved and authorised for issue by the Board on 13 June 2018 and signed on its behalf by:

Directors: JONATHAN GLENN PAUL HAYES

Consort Medical plc Registered number: 406711


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COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 APRIL 2018

Attributable to owners of the Company

Share capital

£m

Share premium

£m

Retained earnings

£m

Total equity

£m

Balance at 1 May 2016 4.9 137.4 1.3 143.6 Profit for the financial year and total comprehensive income – – 32.5 32.5 Transactions with owners:Recognition of share-based payments – – 1.3 1.3 Movement on tax arising on share-based payments – – 0.1 0.1 Proceeds from exercise of employee options – 0.6 – 0.6 Consideration paid for purchase of own shares (held in trust) – – (3.0) (3.0)Equity dividends – – (9.6) (9.6)

– 0.6 (11.2) (10.6)Balance at 30 April 2017 4.9 138.0 22.6 165.5 Profit for the financial year and total comprehensive income – – 13.6 13.6 Transactions with owners:Recognition of share-based payments – – 1.1 1.1 Proceeds from exercise of employee options – 0.5 – 0.5 Consideration paid for purchase of own shares (held in trust) – – (2.2) (2.2)Equity dividends – – (10.1) (10.1)

– 0.5 (11.2) (10.7)Balance at 30 April 2018 4.9 138.5 25.0 168.4

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NOTES TO THE COMPANY ACCOUNTS

A. Presentation of the financial statements and accounting policiesBasis of preparationThe separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union.

Accounting conventionThe financial statements have been prepared using the historical cost convention, as modified by certain financial assets and financial liabilities (including derivative instruments) at fair value. The specific accounting policies adopted, which have been approved by the Board and which have been applied consistently in all years presented, are the same as those set out in note 1 of the consolidated financial statements with the addition of the policies noted below.

InvestmentsInvestments in subsidiaries are accounted for at fair value.

Parent company financial statementsOn publishing the parent company financial statements together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement, statement of comprehensive income, cash flow statement and related notes that form a part of these approved financial statements. The profit on ordinary activities after taxation for the financial year dealt with in the accounts of the Company was £13.6m (2017: £32.5m).

Where transactions are the same for both the Group and the Company, the related notes have not been repeated and readers should refer to the notes included in the consolidated financial statements.

B. Property, plant and equipment Short-term leasehold

improvements £m

Plant and equipment

£m


£m Total

£m

CostAt 1 May 2017 0.1 0.3 0.2 0.6 Additions 0.2 0.2 0.5 0.9 Transfers – – (0.2) (0.2)At 30 April 2018 0.3 0.5 0.5 1.3 Accumulated depreciationAt 1 May 2017 0.1 0.2 – 0.3 Charge for the year – 0.1 – 0.1 At 30 April 2018 0.1 0.3 – 0.4 Net book amount at 30 April 2018 0.2 0.2 0.5 0.9

Transfers relate to amounts transferred from assets under construction to intangible assets during the year.


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B. Property, plant and equipment continuedShort-term leasehold

improvements £m

Plant and equipment

£m


£m Total

£m

CostAt 1 May 2016 0.1 0.3 – 0.4 Additions – – 0.2 0.2 At 30 April 2017 0.1 0.3 0.2 0.6 Accumulated depreciationAt 1 May 2016 0.1 0.2 – 0.3 Charge for the year – – – – At 30 April 2017 0.1 0.2 – 0.3 Net book amount at 30 April 2017 – 0.1 0.2 0.3

C. Intangible assetsComputer

software £m

Total£m

CostAt 1 May 2017 – – Additions 0.2 0.2 Transfers 0.2 0.2 At 30 April 2018 0.4 0.4 Accumulated amortisationAt 1 May 2017 – – Charge for the year – – At 30 April 2018 – – Net book amount at 30 April 2018 0.4 0.4 Net book amount at 30 April 2017 – –

D. Investments 2018

£m 2017

£m

Subsidiary undertakingsNet book value at 1 May 2017 and 30 April 2018 303.5 303.5 Other equity investmentsInvestment in Atlas Genetics Ltd 9.4 9.4 Investment in Oxular Ltd 2.0 2.0 Net book value at 30 April 314.9 314.9

The Company has accounted for both Oxular Ltd and Atlas Genetics Ltd as equity investments and concluded that their cost represents an appropriate fair value.

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NOTES TO THE COMPANY ACCOUNTS CONTINUED

E. Amounts receivable from Group undertakings 2018

£m 2017

£m

Long-term loans receivable from Group undertakingsAt 1 May 215.2 199.2 Net movement in the year 10.0 16.0 Net book value at 30 April 225.2 215.2

Interest is charged on long-term loans to subsidiaries at rates linked to LIBOR and EURIBOR.

A list of all of the Company’s subsidiaries is included in note 28 on page 140.

F. TaxationDeferred tax

2018£m

2017£m

Deferred tax liabilitiesAccelerated tax depreciation – – Intangibles – –

– – Deferred tax assetsTax losses 4.5 4.5 Less not recognised (4.5) (4.5)Tax losses recognised – – Share-based payments 0.4 0.4 Provisions and deferred income 0.1 0.1

0.5 0.5 Net deferred tax asset 0.5 0.5 Assets 0.5 0.5 Liabilities – – Net deferred tax asset 0.5 0.5 Provision for deferred taxAt 1 May 0.5 0.7 Adjustments in respect of prior periods – (0.1)Charged to the income statement:– Provisions – 0.1 – Share-based payments – (0.1)Credit to equity – (0.1)At 30 April 0.5 0.5

Deferred tax assets in the Company are recognised on the basis that their reversal in the future will generate current year losses which will be surrendered to subsidiary undertakings in exchange for payment at the prevailing tax rate.


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G. Trade and other receivables 2018

£m 2017

£m

Amounts receivable from Group undertakings 13.1 10.4 Other taxation 0.1 0.1 Prepayments and accrued income 0.2 0.1

13.4 10.6 Due within one year 13.4 10.6

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.

Amounts receivable from Group undertakings include amounts denominated in GBP and EUR and include short-term loans on which interest is charged at rates linked to LIBOR and EURIBOR.

H. Cash and cash equivalents 2018

£m 2017

£m

Cash at bank and in hand 2.5 3.8 2.5 3.8

I. Trade and other payables 2018

£m 2017

£m

Trade payables 0.7 0.3 Amounts payable to Group undertakings 275.3 272.1 Other taxation and social security 0.1 0.1 Accruals and deferred income 3.7 3.4

279.8 275.9 Due after more than one year: 15.9 15.9 Due within one year 263.9 260.0

Amounts payable to Group undertakings have no fixed date of repayment. Interest on certain balances is charged at rates linked to LIBOR and EURIBOR. The balances due after more than one year are amounts payable to Group undertakings.

J. Provisions and other liabilitiesEmployee

benefits £m

Total £m

At 1 May 2017 0.3 0.3 Provided in the year 0.3 0.3 Utilised in the year (0.1) (0.1)At 30 April 2018 0.5 0.5 Analysis of total provisions:Current 0.2 0.2 Non-current 0.3 0.3 Total 0.5 0.5

Employee benefits represents a provision for national insurance contributions on share options and other share-based payments.

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NOTES TO THE COMPANY ACCOUNTS CONTINUED

J. Provisions and other liabilities continuedFor all provisions, the amounts provided represent management’s best estimate of the most likely outcome. The split of provisions between current and non-current reflects the expected timing of the associated cash outflows.

K. Commitments and contingent liabilities 2018

£m 2017

£m

Property, plant and equipment(i) Capital expenditure contracted for but not provided in the accounts 0.2 – (ii) Commitments under operating leases:As lessee:The future aggregate minimum lease payments under non-cancellable operating leases are as follows:No later than one year 0.3 0.2 Later than one year and no later than five years 0.8 0.8 Later than five years and no later than 25 years 0.8 0.9

1.9 1.9

L. Related party transactionsThe consolidated financial statements include details of all subsidiaries of the Company.

The following tables provide the total amount of transactions which have been entered into with related parties for the relevant financial year:

Sale of goods and services

Purchase of goods and services

Amounts owed by related parties

Amounts owed to related parties

Company 2018

£m 2017

£m 2018

£m 2017

£m 2018

£m 2017

£m 2018

£m 2017

£m

Subsidiaries 11.0 10.9 1.0 0.9 238.3 225.6 275.3 272.1

Terms and conditions of transactions with related partiesThe sales to and purchases from related parties are made at normal market prices. Outstanding balances that relate to trading are unsecured, interest-free and settlement occurs in cash. Long-term loans owed to and from the Company by subsidiary undertakings generally bear market rates of interest in accordance with the intercompany loan agreements. Consort Medical plc has provided guarantees to suppliers of Integrated Aluminium Components Ltd amounting to £1.4m (2017: £1.7m), including a property lease that runs until 2020.

A provision of £3.1m exists against the amount due from Integrated Aluminium Components Ltd to Consort Medical plc (2017: £3.1m). No other provisions have been made against amounts from related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Outstanding balances with the Company’s pension scheme are disclosed in note 21 on pages 123 to 127.

Compensation of key management personnel of the CompanyRemuneration of key management personnel is disclosed within the Directors’ Remuneration Report on pages 59 to 68.


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GROUP FIVE-YEAR RECORD

2018£m

2017£m

2016(note 1)

£m

2015(note 1)

£m

2014(note 1)

£m

Revenue 311.1 294.0 276.9 184.8 100.0Operating expenses before special items (268.4) (254.0) (239.9) (159.7) (81.2)Operating profit before special items 42.7 40.0 37.0 25.1 18.8Special items (20.9) (13.7) (21.0) (16.9) (1.4)Operating profit 21.8 26.3 16.0 8.2 17.4Finance income 0.2 0.1 – 0.1 0.2Finance costs (3.2) (3.0) (3.3) (2.4) (0.9)Other finance costs (1.5) (1.5) (1.4) (0.4) (0.6)Profit before tax 17.3 21.9 11.3 5.5 16.1Tax on profit before special items (6.6) (3.8) (4.2) (3.2) (3.6)Special items – tax 5.4 4.5 8.9 4.0 1.1Tax (charge)/credit (1.2) 0.7 4.7 0.8 (2.5)Profit for the financial year 16.1 22.6 16.0 6.3 13.6

Basic earnings per ordinary share 32.9p 46.2p 32.7p 15.4p 41.5p Diluted earnings per ordinary share 32.7p 45.7p 32.3p 15.1p 40.5p Adjusted basic earnings per ordinary share 64.5p 65.1p 57.6p 47.8p 48.3p Dividends declared 21.00p 20.30p 19.31p 18.11p 20.70p

Notes:1 Continuing operations only.2 The above financial information has been extracted from the audited consolidated financial statements for 2014 to 2018 inclusive.

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SHAREHOLDER INFORMATION

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BOARD OF DIRECTORSDr Peter Fellner ChairmanJonathan Glenn Chief Executive OfficerPaul Hayes Chief Financial OfficerDr William Jenkins Non-executive directorSteve Crummett Non-executive directorIan Nicholson Non-executive directorDr Andrew Hosty Non-executive directorCharlotta Ginman Non-executive director

COMPANY SECRETARY Paul Hayes

REGISTERED OFFICESuite B Breakspear ParkBreakspear WayHemel HempsteadHertfordshireHP2 4TZUnited KingdomTelephone: +44 (0)1442 867920Facsimile: +44 (0)1442 245237

Email: [email protected]

REGISTERED NUMBER406711

WEBSITEwww.consortmedical.com

INDEPENDENT AUDITORKPMG LLP15 Canada SquareLondonE14 5GL

PRINCIPAL BANKERSThe Royal Bank of Scotland plcBarclays Bank plcLloyds Bank plcSantander UK plc

FINANCIAL ADVISERSEvercore Partners International LLP

STOCKBROKERSInvestec Bank plcRBC Capital Markets

REGISTRARSLink Asset Services34 Beckenham RoadBeckenhamKentBR3 4TU

Telephone: +44 (0)871 664 0300 (overseas call +44 (0) 371 664 0300). Calls cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom will be charged at the applicable international rate. The lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales.

Email: [email protected]

https://www.linkassetservices.com/

COMPANY INFORMATION



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FINANCIAL CALENDAR

FY2018 Year end 30 April 2018

Annual General Meeting5 September 2018

Ex dividend date27 September 2018

Record date28 September 2018

Payment of final dividend26 October 2018

FY2019Year end 30 April 2019

Announcement of half-year resultsDecember 2018

Interim dividend dateFebruary 2019

151


25956 19 July 2018 6:47 AM Proof Six

SHAREHOLDER NOTES




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Consort Medical plcSuite B Breakspear ParkBreakspear WayHemel HempsteadHertsHP2 4TZUnited Kingdom

T: +44 (0) 1442 867920F: +44 (0) 1442 245237

www.consortmedical.com

AN

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L REPORT & A

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TS for the year ended

30 April 2018

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RT MEDIC

AL PLC

providing life improving pharmaceuticals and ......providing life improving pharmaceuticals and...

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