Key Performance Indicators

Strategic AimKPIFY2017FY2016Explanation Narrative
Sustained organic revenue growth

Leverage core strengths/business with existing and new customers

New contracts (development portfolio) with existing and new customers
New contracts (development portfolio) with existing and new customers – the Group maintains a healthy portfolio of opportunities and monitors their progression towards commercial launch.

1514

During FY2017 we successfully added two new projects to Bespak's development portfolio – one respiratory project and one injectable. Bespak's development portfolio has grown to 15 live programmes.

In the injectables space, we signed a significant new master agreement for our proprietary Vapoursoft® Syrina® auto-injector technology (project SYR075) with a leading global biopharmaceutical company. Initially, there is a single drug/device combination, but the agreement allows for the addition of others, and contains outline terms for commercial supply.

In respiratory, we signed a significant new commercial supply agreement for Bespak's proprietary respiratory devices with AstraZeneca. This is a multi-year agreement for the scale-up and supply of Bespak's proprietary pressurised metered dose inhaler (pMDI) valves and actuators for AstraZeneca's Bevespi Aerosphere® inhalation aerosol which was approved by the US FDA in April 2016 and launched in the USA in January 2017.

Also in the period, UCB received regulatory approval from the European Medicines Agency for INJ570, an auto-injector for UCB's Cimzia®, which was successfully launched in the UK. The product has also been launched in other European markets.

Broaden offering into adjacent markets and territories

Market and product diversification
Bespak revenue from non-MDI products is reviewed to assess the extent to which Bespak has diversified revenues from the core respiratory MDI business.

£59.9m£57.3m

Bespak's revenue from non-MDI products increased by £2.6m in FY2017 as a result of its growing dry powder inhaler business; a significant increase in revenue from other sources, including 75% increase in injectables sales. Group revenue has continued to diversify with Aesica's growing contribution.

Deepen offering capturing more of the value chain

Higher value business models
The Group's strategy is to help sustain organic growth through increased capabilities and the development of the innovation pipeline to generate future revenues.

Following on from the award, in FY2016, of the Group's first drug and device development and manufacturing contract with Oxular, the Group continues to pursue new opportunities that will leverage both Bespak's device development and manufacturing, as well as Aesica's formulation, manufacturing and filling capabilities.

During FY2017 Aesica has been routinely supplying commercial product using the first semi-continuous processing line and technology installed at the Queenborough site and we anticipate using this line for additional third party development work in the future.

Growth and investment
The Group reviews operating cash flow (defined as cash from operations less capital expenditure) as a percentage of operating profit (both before special items) in order to generate a cash conversion metric and understand the relationship between trading, cash and capital investment.

83%91%

In the current year, the Group's conversion of operating profit into cash inflows reduced to 83%. This was mainly driven by adverse working capital variances as a result of releases/utilisation of deferred income and provisions balances.

Operating leverage

Margin expansion from volume growth & cost efficiency

EBIT growth vs. revenue growth
The Group reviews the level of EBIT growth against the level of revenue growth at both the Group, and divisional levels, to evaluate operating leverage.

EBIT before special items increased by 8.3% to £40.0m and by 4.1% at constant exchange rates. This included 3.9% growth from Bespak to £26.1m (FY2016: £25.2m) which has continued to deliver strong operating leverage on higher revenues. Bespak EBIT margin increased by 10bps to 21.6%. Aesica EBIT increased 17.7% to £13.9m, with EBIT margin growing 60bps to 8.0% reflecting improved underlying operating performance during the period.

Innovation
(Bespak)

Develop new device and formulation technologies

New device technologies

New customer and patient-driven device technologies with near-term commercial opportunities.

The commercial and innovation teams have continued to generate very strong interest in our new technology platforms on a range of opportunities. The innovation funnel has progressed broadly during the period across a number of therapeutic areas and technologies. These development and feasibility programmes cover a range of therapeutic areas and are all in partnership with biotech and pharmaceutical companies. These complement our current customer portfolio in our core business. This is again indicative of the strength and success of our innovation drive and strategy to broaden and diversify our product and customer base.

Vapoursoft® powered Syrina® auto-injectors, Vapoursoft® powered Lapas® auto-injectors, and our Lila Mix and Duo technologies have continued to generate widespread interest as innovative and novel drug delivery devices, with several biotech and pharmaceutical companies initiating feasibility and development programmes for their injectable drugs portfolios.

This rapidly expanding innovation funnel includes an active schedule of early stage development programmes, feasibility programmes, and programmes awaiting initiation.

In October 2016, Bespak unveiled its latest addition to the Syrina® range of auto-injectors: the new Syrina® AR 2.25 auto-injector, suitable for delivering volumes of up to 2.0ml using a standard 2.25ml pre-filled syringe. Syrina® AR 2.25 provides patients with a fully-automatic two-step, compact device for the self-administration of viscous drug formulations smoothly and safely in less than 15 seconds. Designed with a hidden needle, Syrina® AR 2.25 offers automatic needle insertion and retraction, as well as drug delivery with a single push-on-skin operation. Syrina® AR 2.25 has been tailored specifically for higher viscosities while still enabling the safe use of glass syringes.

Innovation
(Aesica)

New formulation technologies
New customer-driven formulation technologies with near-term commercial opportunities.

During FY2017 Aesica has been routinely supplying commercial product using the first semi-continuous processing line and technology installed at the Queenborough site and we anticipate using this line for additional third party development work in the future.

Aesica has also moved from validation to routine supply of S+ flurbiprofen to a leading Japanese pharmaceutical company to provide the active ingredient for an anti-inflammatory formulation.

A changing regulatory requirement within the pharmaceutical industry is for products to be uniquely identifiable at the individual pack level. This process is known in the industry as serialisation. Aesica has been an early provider of serialisation services to the industry including China and Latin America that have adopted this process. It is also well advanced in developing the service for the next wave of territories adopting serialisation including the EU. We believe Aesica is in a strong position relative to the sector in general and we have been actively promoting this offering with marketing and industry events such as a recent webinar series. Further capital expenditure is being committed to enhance our capabilities in this area.

Enhancement

Selective acquisitions and investments

Complementary acquisitions and strategic investments
Strategic fit and EPS enhancement – the Group reviews multiple acquisition and strategic investment opportunities and employs a rigorous assessment and due diligence process to validate the quality, strategic fit and valuation of each opportunity. In addition, the Group evaluates the impact of any acquisition on EPS.

Further equity investment made in Atlas GeneticsAesica successfully integrated within budget. Equity investment in Oxular

In January 2017, Consort subscribed for a further £3.1m equity investment in Atlas Genetics Ltd as part of a £28.4m Series D funding. Atlas is a diagnostic company developing ultra-rapid point of care tests for a range of infectious diseases.

This investment followed Atlas Genetics' successful CE marking for the Chlamydia Trachomatis (CT) io® test cartridge and the funding was raised to finance the continued development of the combined Chlamydia and Gonorrhoea (CT/NG) assay and test cartridge. This is planned for regulatory approvals in the US and Europe around early 2018. The equity raise also provides funding to expand manufacturing capacity at Bespak, which is Atlas' development and manufacturing partner.

Consort now holds a 15.2% shareholding in Atlas (13.4% on a fully diluted basis) having invested a total to date of £9.4m in the company.

Shareholder value
EPS enhancement – the Group reviews EPS from continuing operations before special items to assess the level of return generated for investors in the period.

65.1p57.6p

Adjusted basic EPS increased by 13.1% to 65.1p during the year as a result of continued margin improvement in both businesses.