Company Registration No. 04345895 (England and Wales)
ALIGN TECHNOLOGY UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
ALIGN TECHNOLOGY UK LIMITED
COMPANY INFORMATION
Directors
J Tandy
J A Coletti
(Appointed 27 November 2019)
M C Sebastian
(Appointed 27 November 2019)
Company number
04345895
Registered office
2800 The Crescent
Solihull Parkway
Birmingham Business Park
Solihull
B37 7YL
Auditor
Alliotts LLP
Imperial House
8 Kean Street
London
WC2B 4AS
ALIGN TECHNOLOGY UK LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4
Independent auditor's report
5 - 6
Statement of comprehensive income
7
Statement of financial position
8
Statement of changes in equity
9
Notes to the financial statements
10 - 21
ALIGN TECHNOLOGY UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 1 -
The directors present the strategic report for the year ended 31 December 2019.
Fair review of the business
Align Technology is a global medical device company engaged in the design, manufacture and marketing of the Invisalign system, the most advanced clear aligner system in the world, and iTero intraoral scanners and services for orthodontic and restorative dentistry.
The orthodontic market in the UK represents approximately 75,000 case starts annually. Align’s share of orthodontic case starts remains underpenetrated and the company’s growth reflects continued adoption of clear aligner therapy. The clear aligner market is highly competitive, with a number of clear aligner companies operating in the country, many of whom spend considerate budgets on advertising to consumers. The Invisalign system continues to be adopted by the British doctors and has been a popular choice among the patients who have general high awareness of available teeth straightening solutions and who continue to search for Invisalign treatment by name. However, as the number of clear aligner competitors increases, it is essential that the company continue to invest in new technological enhancements and solutions, as well as consumer demand creation programs and advertising.
Results 2019
The Company’s business has grown over the past years, driven by numerous product introductions, penetration into the teenager segment, and by evolving consumer demand programs while increasing operational efficiencies.
For 2019, the Company’s net revenues increased by
29
% year over year driven by increasing sales of Invisalign treatments. The Company’s selling expenses increased by 23% due to advertising and marketing programs and employee related costs increase in the region.
Research and Development
The future of the Align business is supported by an evolving product line up and continuous investment into innovations and developments. We are committed to investing in world-class technology development, which we believe is critical to achieving our goal of establishing the Invisalign System as the standard method for treating malocclusion and our intraoral scanning platform as the preferred scanning protocol for digital scans.
Our research and development activities are directed toward developing the technology innovations that we believe will deliver our next generation of products and platforms. These activities range from accelerating product and clinical innovation to developing manufacturing process improvements to researching future technologies and products.
In an effort to demonstrate the broad treatment capabilities of the Invisalign System, various clinical case studies and articles have been published that highlight the clinical applicability of Invisalign to malocclusion cases, including those of severe complexity. We undertake pre-commercialization trials and testing of our technological improvements to the product and manufacturing process
ALIGN TECHNOLOGY UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 2 -
Risks and Threats
Our company is exposed to numerous risks due to its global activities. The Company handles these risks responsibly in accordance with our business policy.
The risks and uncertainties that relates to the future profitability of the business are:
Our operating results depend to a significant extent on our ability to market and develop our products. The life cycles of our products are difficult to estimate due, in part, to the effect of future product enhancements and competition. Our inability to successfully develop and market our products as a result of competition or other factors would have a material adverse effect on our business, financial condition and results of operations.
Competition in the markets for our products is increasing and we expect aggressive competition from existing competitors and other companies that may introduce new technologies in the future.
Currently, our clear aligner products compete directly against traditional metal brackets and wires and increasingly against clear aligner products manufactured and distributed by new market entrants as well as traditional manufacturers of wires and brackets and from traditional medical device companies, laboratories, startups and, in some cases, from doctors themselves.
Our success depends on our ability to profitably develop, manufacture, market and obtain regulatory approval or clearance of new products and improvements to existing products. There is no assurance we can successfully develop, sell and achieve market acceptance of new or improved products and services.
COVID-19
In the short term, our business may be particularly susceptible to the impact of the COVID-19 pandemic. On the one hand, all or a material portion of our products may be viewed as discretionary purchases and therefore more susceptible to any global or regional recession that may result from efforts to prevent or delay the spread of the virus. Moreover, efforts to slow or prevent a recurrence of the spread of the virus are likely to continue causing disruption and uncertainties in the markets resulting in curtailed operations by our customers and their patients for an indeterminate period of time. This in turn could impact our operations as purchasing decisions are delayed or lost, logistics complexities as a result of closed customer offices, sales and marketing efforts are postponed, and manufacturing operations are curtailed to adjust to declining sales. On the other hand, COVID-19 has also demonstrated the benefits of digital dentistry and virtual appointments, which may motivate doctors to use more digital solutions such as Align’s products and services including the iTero scanner and Invisalign system.
Furthermore, we are working to mitigate the impact of social distancing for our customers and their patients. These efforts include moving most of our clinical education program critical to doctor engagement online, launching our Invisalign Virtual Appointment tool and launching the Invisalign Virtual Care Program.
ALIGN TECHNOLOGY UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 3 -
Forecast
Globally rising incomes and higher life expectancy are the main growth drivers in the dental market, which is at the same time characterized by moderate price pressure due to concentration among dental practices. Local fluctuations in demand due to changes in the healthcare system will continue to occur.
The Company’s innovative products and technology and focus on providing Invisalign doctors with
exceptional hands-on customer support, has enabled the company to continuously outpace the growth rate of the underlying market for orthodontic treatment and increase its performance. The company will continue to drive growth for its business by gaining share of the existing orthodontic market as well as by expanding the market for clear Aligners
.
Key Performance Indicators
The Company does not monitor any Key Performance Indicators due to the nature of remuneration model.
J Tandy
Director
9 April 2021
ALIGN TECHNOLOGY UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 4 -
The directors present their annual report and financial statements for the year ended 31 December 2019.
Principal activities
The principal activities of the company continued to be Sales and Marketing support to the UK market, together with the provision of a Customer Care function and a Clinical Support function.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
R E George
(Resigned 27 November 2019)
S Beard
(Resigned 27 November 2019)
J Tandy
J A Coletti
(Appointed 27 November 2019)
M C Sebastian
(Appointed 27 November 2019)
Results and dividends
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and prudent;
-
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
J Tandy
Director
9 April 2021
ALIGN TECHNOLOGY UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ALIGN TECHNOLOGY UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Align Technology UK Limited (the 'company') for the year ended 31 December 2019 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its profit for the year then ended;
-
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor's
responsibilities for the audit of the financial statements
section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
-
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue
.
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit
:
-
the information given in the strategic report and the directors' r
eport for the financial year for which the financial statements are prepared is consistent with the financial statements
; and
-
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
ALIGN TECHNOLOGY UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ALIGN TECHNOLOGY UK LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identifie
d
material misstatements in the strategic report and the directors'
r
eport
.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
-
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-
the financial statements 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.
Responsibilities of directors
As explained more fully in the directors'
r
esponsibilities
s
tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
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 error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities
.
This description forms part of our auditor’s report.
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.
Christopher Mantel (Senior Statutory Auditor)
for and on behalf of Alliotts LLP
9 April 2021
Chartered Accountants
Statutory Auditor
Imperial House
8 Kean Street
London
WC2B 4AS
ALIGN TECHNOLOGY UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
- 7 -
2019
2018
Notes
£
£
Revenue
3
22,373,884
17,187,838
Administrative expenses
(19,128,011)
(15,915,620)
Other operating expenses
(20,134)
(1,853)
Operating profit
4
3,225,739
1,270,365
Investment income
7
6,646
4,542
Finance costs
8
(1,613)
-
Profit before taxation
3,230,772
1,274,907
Tax on profit
9
(678,092)
811
Profit for the financial year
2,552,680
1,275,718
The income statement has been prepared on the basis that all operations are continuing operations.
ALIGN TECHNOLOGY UK LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2019
31 December 2019
- 8 -
2019
2018
Notes
£
£
£
£
Non-current assets
Property, plant and equipment
10
1,460,625
202,316
Current assets
Trade and other receivables
11
3,077,749
3,560,309
Cash and cash equivalents
4,482,668
4,465,040
7,560,417
8,025,349
Current liabilities
12
(2,596,119)
(4,527,119)
Net current assets
4,964,298
3,498,230
Total assets less current liabilities
6,424,923
3,700,546
Provisions for liabilities
13
(171,697)
-
Net assets
6,253,226
3,700,546
Equity
Called up share capital
16
2
2
Retained earnings
6,253,224
3,700,544
Total equity
6,253,226
3,700,546
The financial statements were approved by the board of directors and authorised for issue on 9 April 2021 and are signed on its behalf by:
J Tandy
Director
Company Registration No. 04345895
ALIGN TECHNOLOGY UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
- 9 -
Share capital
Retained earnings
Total
£
£
£
Balance at 1 January 2018
2
2,424,826
2,424,828
Year ended 31 December 2018:
Profit and total comprehensive income for the year
-
1,275,718
1,275,718
Balance at 31 December 2018
2
3,700,544
3,700,546
Year ended 31 December 2019:
Profit and total comprehensive income for the year
-
2,552,680
2,552,680
Balance at 31 December 2019
2
6,253,224
6,253,226
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 10 -
1
Accounting policies
Company information
Align Technology UK Limited is a
private
company
limited by shares
incorporated in England and Wales.
The registered office is
2800 The Crescent, Solihull Parkway, Birmingham Business Park, Solihull, B37 7YL. The principal place of business is 6th Floor, Cannongate House, 62-64 Cannongate Street, London, EC4N 6AE.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in
sterling
, which is the functional currency of the company.
Monetary a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares
publicly available consolidated financial statements
, including this company,
which are
intended to give a true and fair view of the assets, liabilities,
financial position and profit or loss
of the group
.
T
he company has
therefore
taken advantage of
e
xemptions from the following disclosure requirements:
- Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
-
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’
:
Interest income/expense and net gains/losses for each category of financial instrument;
basis
of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income
;
-
Section 26 ‘Share based Payment’
:
Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements
;
-
Section 33 ‘Related Party Disclosures’
:
Compensation for key management personnel
.
The financial statements of the company are consolidated in the financial statements of
Align Technology Inc, incorporated in the United States
. These consolidated financial statements are available from its registered office
at 2820, Orchard Parkway, San Jose California, 95134, United States.
1.2
Going concern
Since the year end the Company has been impacted by the Coronavirus pandemic. As part of the directors going concern assessment they have considered the operating restrictions placed on the business by the on-going pandemic and the potential cash flow requirements needed to continue in operation through this period. Whilst it is not possible to determine with any accuracy the full impact of the pandemic on the Company the directors have enquired of the group over the available level of support that can be expected during this period.
true
The directors believe that the Company can successfully manage its business risks and, after making relevant enquiries, the directors have a reasonable expectation that the Company will have access to adequate resources to continue to trade for the foreseeable future and they believe it is appropriate to continue to adopt the going concern basis in preparing the annual report and accounts. No adjustments have been made should the parent company withdraw its support to the Company.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 11 -
1.3
Revenue
Income is recognised in an accordance with a revised “transfer pricing” agreement with the Group to ensure a set level of operational profit is achieved based on an underlying formula driven by the sales generated in the UK. Previous to this, income was recognised in an accordance with a "cost-plus" service agreement with the Group to which the company belongs. Income is recognised based on a formula that is applied to costs incurred. The change is not considered a change in accounting policy and does not require retrospective adjustment.
1.4
Property, plant and equipment
Property, plant and equipment
are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Land and buildings Leasehold
Over the term of the lease
Fixtures, fittings & equipment
20% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and
is credited or charged to profit or loss
.
1.5
Impairment of non-current assets
At each reporting
period
end date, the
company
reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.6
Cash and cash equivalents
Cash and cash equivalents
are basic financial assets
and
include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 12 -
1.7
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
the net amounts presented in the financial statements
,
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest
method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those
held
at
fair value through profit and loss
, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected.
If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when
the company
transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 13 -
Basic financial liabilities
Basic financial liabilities, including trade and other payables, are
initially recognised at transaction price unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present value of
the future receipts discounted at a market rate of interest.
Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective
interest rate method.
Trade payables
are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. A
m
ounts payable are classified as
current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities. Trade payables are recognised initially at transaction price
and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.8
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.9
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
company’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
D
eferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
company
has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 14 -
1.10
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.11
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.12
Share-based payments
For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
1.13
Leases
Rentals payable under operating leases,
including
any lease incentives received, are charged to
profit or loss
on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease
s
asset are consumed.
1.14
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the income statement for the period.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant
effect on amounts recognised in the financial statements.
Tangible assets
Tangible fixed assets are recorded at cost less accumulated depreciation. Judgement is required to determine whether there are indicators of impairment of the company’s tangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 15 -
3
Revenue
An analysis of the company's revenue is as follows:
2019
2018
£
£
Revenue analysed by class of business
Provision of services
22,373,884
17,187,838
2019
2018
£
£
Other significant revenue
Interest income
6,646
4,542
2019
2018
£
£
Revenue analysed by geographical market
United Kingdom
22,373,884
17,187,838
4
Operating profit
2019
2018
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange losses
20,134
1,853
Fees payable to the company's auditor for the audit of the company's financial statements
9,000
9,000
Depreciation of owned property, plant and equipment
302,376
106,579
Profit on disposal of property, plant and equipment
(27,474)
-
Share-based payments
815,929
1,957,538
Operating lease charges
1,026,939
507,102
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £20,134 (2018 - £1,853).
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2019
2018
Number
Number
Sales and administration
104
81
Management
4
3
108
84
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
5
Employees
(Continued)
- 16 -
Their aggregate remuneration comprised:
2019
2018
£
£
Wages and salaries
7,713,810
7,292,426
Social security costs
2,097,141
2,098,860
Pension costs
237,628
190,983
10,048,579
9,582,269
6
Share based incentives
Under the 'Amended and Restated 2005 Incentive Plan', the company's ultimate parent, Align Technology Inc, a company listed in the US Stock exchange, issues shares of Align Technology Inc upon vesting of restricted stock units (RSUs) or performance stock units (PSU). The issuance of shares and cash received upon exercise or sale is undertaken solely by Align Technology Inc.
During the year ended 31 December 2018, the UK company started to reimburse the US company, the extent of share based incentive relating to the employees in its payroll, calculated in accordance with the intrinsic fair value of the units as on the date of grant, apportioned over the vesting period. The expense payable for the year amounted to £815,929 (2018: £1,957,538).
Align Technology Inc's relevant employee benefit plans are summarized as follows:
(1) RSU
RSUs granted under this plan vest over four years, based on continued employment, and are settled upon vesting in shares of Align Technology Inc's common stock for on a one-for-one basis. The fair value is the listed market price on the grant date of Align Technology Inc's stock on NASDAQ (US stock exchange).
(2) PSU
PSUs granted under this plan vest over a period of three years commencing from the date of grant based on continued employment. Any market units that vest in accordance with this plan, will be paid to participant in whole shares at the end of the vesting period. The number of market stock units in which the participant may vest will depend upon Align Technology Inc's Stock price performance as compared to the NASDAQ Composite price performance for the performance period.
7
Investment income
2019
2018
£
£
Interest income
Interest on bank deposits
6,646
4,542
8
Finance costs
2019
2018
£
£
Other interest
1,613
-
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 17 -
9
Taxation
2019
2018
£
£
Current tax
Adjustments in respect of prior periods
596,972
-
Deferred tax
Origination and reversal of timing differences
81,120
(811)
Total tax charge/(credit)
678,092
(811)
The actual charge/(credit) for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2019
2018
£
£
Profit before taxation
3,230,772
1,274,907
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2018: 19.00%)
613,847
242,232
Tax effect of expenses that are not deductible in determining taxable profit
2,291
31,779
Tax effect of utilisation of tax losses not previously recognised
2,041
-
Unutilised tax losses carried forward
-
1,246,033
Adjustments in respect of prior years
615,662
-
Capital allowances
38,112
(33,870)
Schedule 23 deduction
(592,905)
(1,486,174)
Timing differences
(956)
(811)
Taxation charge/(credit) for the year
678,092
(811)
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 18 -
10
Property, plant and equipment
Land and buildings Leasehold
Assets under construction
Fixtures, fittings & equipment
Total
£
£
£
£
Cost
At 1 January 2019
213,725
-
263,164
476,889
Additions
612,487
54,219
893,979
1,560,685
Disposals
(40,000)
-
-
(40,000)
At 31 December 2019
786,212
54,219
1,157,143
1,997,574
Depreciation and impairment
At 1 January 2019
185,796
-
88,777
274,573
Depreciation charged in the year
28,172
-
274,204
302,376
Eliminated in respect of disposals
(40,000)
-
-
(40,000)
At 31 December 2019
173,968
-
362,981
536,949
Carrying amount
At 31 December 2019
612,244
54,219
794,162
1,460,625
At 31 December 2018
27,929
-
174,387
202,316
11
Trade and other receivables
2019
2018
Amounts falling due within one year:
£
£
Corporation tax recoverable
-
119,705
Amounts owed by group undertakings
2,581,149
3,232,020
Other receivables
264,499
192,652
Prepayments and accrued income
141,524
15,932
2,987,172
3,560,309
Deferred tax asset (note 14)
90,577
-
3,077,749
3,560,309
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 19 -
12
Current liabilities
2019
2018
£
£
Trade payables
96,473
81,191
Amounts owed to group undertakings
-
1,903,933
Corporation tax
432,071
-
Other payables
32,500
25,024
Accruals and deferred income
2,035,075
2,516,971
2,596,119
4,527,119
13
Provisions for liabilities
2019
2018
Notes
£
£
Deferred tax liabilities
14
171,697
-
14
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
Assets
Assets
2019
2018
2019
2018
Balances:
£
£
£
£
Accelerated capital allowances
171,697
-
-
-
Tax losses
-
-
90,577
-
171,697
-
90,577
-
2019
Movements in the year:
£
Liability at 1 January 2019
-
Charge to profit or loss
81,120
Liability at 31 December 2019
81,120
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period. The deferred tax liability set out above is expected to reverse within 5 years and relates to accelerated capital allowances that are expected to mature within the same period.
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 20 -
15
Retirement benefit schemes
2019
2018
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
237,628
190,983
The company operates a defined contribution pension scheme for all qualifying employees.
The assets of the scheme are held separately from those of the company in an independently administered fund.
16
Share capital
2019
2018
£
£
Ordinary share capital
Issued and fully paid
2 Ordinary Shares of £1 each
2
2
17
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2019
2018
£
£
Within one year
266,712
93,676
Between two and five years
1,202,515
1,446,761
In over five years
1,224,300
1,224,300
2,693,527
2,764,737
18
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
2019
2018
Amounts due to related parties
£
£
Entities with control, joint control or significant influence over the company
-
1,903,933
ALIGN TECHNOLOGY UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
18
Related party transactions
(Continued)
- 21 -
The following amounts were outstanding at the reporting end date:
2019
2018
Amounts due from related parties
£
£
Entities with control, joint control or significant influence over the company
2,348,468
3,232,020
The company has taken advantage of the exemption available in
Paragraph 33.1A of FRS102
whereby it has not disclosed transactions
with other companies that are wholly owned within the
Group.
The balances due with the parent entities are interest-free, unsecured and repayable on demand.
19
Ultimate controlling party
The i
m
mediate parent company is Align Technology BV, a company registered in
the Netherlands.
The financial statements are consolidated into the
ultimate
parent company
,
Align Technology Inc
,
which is registered in the United States of America. Copies of the financial statements can be obtained from Align Technology Inc,
2820, Orchard Parkway, San Jose, California, 95134, United States.
No one person has overall control.
2019-12-31
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