31st Mar 2006 07:01
Tepnel Life Sciences PLC31 March 2006 31st March 2006 TEPNEL LIFE SCIENCES PLC ("the Company", AIM:TED) www.tepnel.com Tepnel's preliminary results for the year ended 31st December 2005 Tepnel Life Sciences provides research products and services to the fast growing pharmaceutical and biotechnology markets and molecular diagnostic products and services to healthcare providers Highlights • 33% increase in annual sales to £13.60 million (2005) from £10.19 million (2004) • Reduction in operating losses before interest, tax, depreciation, amortisation and exceptional items to £0.17 million (2005) from £1.08 million (2004) (Note 5) • Reduction in annual operating losses (pre-exceptional items) to £0.92 million (2005) from £1.73 million (2004) • Reduction in operating losses to £1.90 million (2005) from £2.28 million (2004) • Operating cash outflow reduced to £0.17 million (2005) from £1.06 million (2004) • Launch of new business strategy focused on Research Products & Services and Molecular Diagnostics • Substantial organic growth from both divisions • Successful integration of businesses acquired in 2004 Chairman's Statement 2005 has been a highly successful year for Tepnel with the achievement of itskey strategic and operational goals. Following the Group's acquisitions ofTepnel Lifecodes Corporation, Tepnel Diagnostics and Diaclone Research in 2004,the Board's strategic objective in 2005 was to focus the Group on its twodivisions, Research Products and Services and Molecular Diagnostics, asannounced in March at our strategic briefing for investors. The Group'soperational objectives revolved around continued organic growth, the integrationof the newly acquired businesses and progress towards profitability. The year began strongly with the signing of a comprehensive researchcollaboration between newly acquired Diaclone and a top twenty pharmaceuticalcompany from Germany, Boehringer Ingelheim. As well as bringing significantincome, the deal underlined the value of the Group's strategy of penetratingboth the research products and molecular diagnostic markets. Under the terms ofthe agreement, Diaclone is developing antibodies for Boehringer Ingelheim fortherapeutic use and successful molecules will generate milestone payments forTepnel as they progress through drug development. Any antibodies notcommercialised by Boehringer Ingelheim will be available for Tepnel to developfor diagnostic and research applications bringing a second opportunity for valuecreation. Organic growth was accelerated by the launch of a series of new and highlyinnovative products from both Tepnel operating divisions in 2005. These rangedfrom tests for significant diseases such as cystic fibrosis and Down syndrome,to food-safety tests for the detection of casein to protect children withdairy-food allergy. The pharmaceutical services business also saw strong growth with major contractssigned with large pharmaceutical companies for DNA purification and analysisservices and significant increases in turnover in microbiology and analyticalservices. Financial results Turnover for the year ended 31st December 2005 grew to £13.60m from £10.19m.This was driven by growth across the Group with Research Products and Servicesturnover increasing by 45% to reach £5.88m (2004: £4.07m) and MolecularDiagnostics growing by 26% to £7.72m (2004: £6.12m). Operating losses before interest, tax, depreciation and amortisation (LBITDA)and exceptional items for the year ended 31st December 2005 were £0.17m, (2004:£1.08m), a reduction of 84%. Operating losses before exceptional items werereduced by 47% to £0.92m (2004: £1.73m). The overall operating loss, afterexceptional items totalling £0.98m, was reduced by 17% to £1.90m (2004: £2.28m).The retained loss for the year after taxation was £1.91m (2004: £2.24m). The basic loss per share for the year was 0.9 pence (2004: 1.5 pence). Net cash outflow from operating activities was reduced to £0.17m compared to£1.06m in the prior year and this was reflected in a reduction in net funds ofonly £0.14m during the year. Cash balances at 31 December 2005 amounted to£2.28m (2004: £2.54m). Net assets at the year-end totalled £5.68m (2004:£7.56m). Overall, Tepnel has once again demonstrated increased sales and increased grossprofits year on year. In addition, losses before interest, tax and exceptionalitems were significantly reduced. Board changes The employment contract of Group Finance Director, Mr Gron Ffoulkes-Davies, wasterminated on 29th November 2005 and a search is underway for his successor.Michael Slater, the new Group Financial Controller, has taken day-to-dayresponsibility for the finance and accounting function. Post balance-sheet events In February 2006, the Group completed the £90,000 purchase of 1.7 acres of landin Livingston, Scotland for the construction of a dedicated pharmaceuticalprotein and genomic analysis facility. The 18,000 square foot state-of-the-artlaboratory will allow us to consolidate our existing pharmaceutical servicesbusiness into a single location and expand our pharmacogenomics capabilities toinclude high throughput genotyping and other genomic analysis techniques. In March 2006, the Group completed the £30,000 acquisition of the GenXTrak DNAextraction business from UK-based Whatman plc. The Cambridge based GenXTrakbusiness will now operate within Tepnel's service division, offering rapid andreliable extraction, purification, quantification and normalisation of clinicalDNA samples. Future Prospects Following the integration of the newly acquired businesses and the focusing ofour strategy on both Research Products and Services and Molecular Diagnosticdivisions, the Group has improved its performance once again in 2005. The Group is focusing its Molecular Diagnostic product development efforts intotwo growth markets: organ transplant monitoring and foetal distress diagnosis.These products include expanded lines of both pre and post operating transplantmonitoring assays based on its highly multiplexed Luminex platform, as well asits QST*R assays for ploidy status of embryos as early as 9-10 weeks for thedetection of Down, Edwards and Patau syndromes. The Research Products and Services division has expanded its capacity fornucleic acid purification (NAP) and analysis services, and has become one of theleading suppliers of NAP services in Europe. The Group is adding an expandedmenu of downstream analytical capabilities including PCR and genotyping. Current Trading Tepnel has made a good start to the year. The Board is confident of reportingfurther progress towards profitability in 2006. Alec CraigNon-Executive Chairman Consolidated Profit and Loss Account for the year ended 31 December 2005 Note Year ended 31 December Year ended 31 December 2005 2004 £'000 £'000Turnover 1 13,602 10,193Cost of sales - normal (6,718) (5,467) - exceptional 2 (556) -Total cost of sales (7,274) (5,467)Gross profit 6,328 4,726Administrative expenses - normal (3,528) (2,722) - exceptional 2 (419) (547)Total administrative expenses (3,947) (3,269)Research and development (1,738) (1,553)Sales and distribution costs (2,542) (2,185)Operating loss (1,899) (2,281)Interest receivable 89 43Interest payable (205) (23)Loss on ordinary activities before taxation 1 (2,015) (2,261)Taxation on loss on ordinary activities 110 19Loss for the financial period 4 (1,905) (2,242)Basic and diluted loss per share 3 0.9p 1.5p Operating loss excluding exceptional items (924) (1,734) Consolidated Statement of Total Recognised Gains and Losses for the year ended31 December 2005 Year ended 31 December Year ended 31 December 2005 2004 £'000 £'000Loss for the financial period (1,905) (2,242)Currency translation differences on retranslation of 14 (36)subsidiary undertakingsTotal losses recognised since last annual report (1,891) (2,278) All items dealt with in arriving at operating loss above relate to continuingoperations. Consolidated Balance Sheet at 31 December 2005 Note 31 December 2005 31 December 2004 £'000 £'000Fixed assetsIntangible assets 1,665 1,882Tangible assets 1,500 1,851 3,165 3,733Current assetsStocks 2,247 2,279Debtors 3,140 2,932Cash at bank and in hand 2,279 2,542 7,666 7,753Creditors: amounts falling due within one year (4,937) (3,927)Net current assets 2,729 3,826Total assets less current liabilities 5,894 7,559Creditors: amounts falling due after more than one year (20) -Provisions for liabilities and charges (190) -Net assets 1 5,684 7,559 Capital and reservesCalled up share capital 2,132 2,129Share premium account 33,601 33,588Profit and loss account (30,049) (28,158)Shareholders' funds 4 5,684 7,559 Consolidated Cash Flow Statement for the year ended 31 December 2005 Consolidated cash flow statement Year ended Year ended 31 December 31 December 2005 2004 £'000 £'000Net cash outflow from operating activities (171) (1,057)Return on investments and servicing of finance 75 20Corporation tax refund 90 180Capital expenditure (230) (317)Acquisitions - (3,838)Net cash outflow before management of liquid resources and (236) (5,012)financingManagement of liquid resources - -Financing (41) 3,310Decrease in cash (277) (1,702) Reconciliation of operating loss to net cash outflow from Year ended Year endedoperating activities 31 December 31 December 2005 2004 £'000 £'000Operating loss (1,899) (2,281)Depreciation 555 596Impairment 84 -Amortisation 197 56Loss on disposal of fixed assets 25 -Decrease in stocks 101 572(Increase)/decrease in debtors (336) 228Increase/(decrease) in creditors 1,102 (228)Net cash outflow from operating activities (171) (1,057) Reconciliation of net cash flow to movements in net funds Year ended Year ended 31 December 31 December 2005 2004 £'000 £'000Decrease in cash (277) (1,702)Cash outflow from decrease in lease financing 144 132Issued debt - (550)Changes in net funds resulting from cash flow (133) (2,120)Conversion of debt to equity - 550Inception of finance leases (20) -Exchange differences 14 -Net funds at beginning of period 2,398 3,968Net funds at end of period 2,259 2,398 Notes: 1 Segmental analysis Turnover, loss before taxation and net assets/(liabilities) by business segment: Year ended 31 December 2005 Research Molecular Total Products and Diagnostics Services £'000 £'000 £'000Turnover 5,881 7,721 13,602 Divisional profit/(loss) pre (361) 352 (9) exceptional and central costsDivisional exceptional costs (312) (473) (785)Divisional loss (673) (121) (794)Central costs (including £190,000 exceptional) - - (1,105)Interest - - (116)Loss before taxation - - (2,015) Net assets 4,246 1,438 5,684 Year ended 31 December 2004 Research Products Molecular Total and Services Diagnostics £'000 £'000 £'000Turnover 4,068 6,125 10,193 Divisional loss pre (742) (65) (807) exceptional and central costsDivisional exceptional costs (547) - (547)Divisional loss (1,289) (65) (1,354)Central costs - - (927)Interest - - 20Loss before taxation - - (2,261) Net assets/(liabilities) 7,689 (130) 7,559 Turnover, profit/(loss) before taxation and net assets by geographical segment: Year ended Year ended 31 31 December 2005 December 2004 £'000 £'000Turnover by geographical destination:UK 3,861 3,577Rest of EU 3,494 2,400US 4,139 3,350Asia 595 472Rest of World 1,513 394 13,602 10,193 Turnover by geographical origin:UK 5,741 5,295Rest of EU 1,404 25US 6,457 4,873 13,602 10,193 Profit/(loss) before taxation by geographical segmentUK (1,465) (2,095)Rest of EU 171 (28)US (721) (138) (2,015) (2,261) Net assets/(liabilities) by geographical segmentUK 2,424 7,889Rest of EU 2,240 (30)US 1,020 (300) 5,684 7,559 2 Exceptional items Year ended Year ended 31 December 31 December 2005 2004 £'000 £'000Cost of sales - exceptional itemsProvision for slow moving/obsolete stock lines1 556 - 556 -Administrative expenses - exceptional itemsProvision for unfair dismissal claim2 190 -Fixed asset impairment3 84 -Legal and other charges4 145 - Costs relating to restructuring5 - 506 Redundancy costs5 - 41 419 547Total exceptional items 975 547 2005 1 Provision for slow moving/obsolete stock lines The exceptional charge for slow moving and obsolete stock is £556,000. TheGroup is constantly improving and developing its product range and during theyear a review of all stock lines across the Group was undertaken and provisionmade for slow moving or obsolete lines. In particular, the success of sales ofthe Lifematch HLA system has led to slower sales of its RFLP HLA products. Themajority of the provision relates to individual stock items within this productline which were acquired with the acquisition of Tepnel Lifecodes. 2 Provision for unfair dismissal claim On the 29th November 2005, the Group terminated the employment contract of Mr GFfoulkes Davies, Group Finance Director. Mr G Ffoulkes Davies has brought aclaim for unfair dismissal in the Manchester Employment Tribunal and a defenceto this action has been filed. The Group has made a provision of £190,000 against any potential award againstthe Group for unfair dismissal and any action that may be brought in respect ofbreach of contract. The directors believe this represents a prudent estimate ofany award that may be made against the Group. The Group is robustly defendingthis claim and is taking legal advice in respect of this issue. 3 Fixed asset impairment The development of the Group's product range led to several capital items nolonger being used within the business. These items were fully written downduring the year and the total of the impairment charge was £84,000. 4 Legal and other charges The Group had exceptional legal and other charges during the year of £145,000.These principally relate to corporate finance and distribution agreementsadvice, but also include lease dilapidation and grant repayment charges. These exceptional items give rise to an unprovided deferred tax asset of£292,500 due to the availability of tax losses. 2004 5 Redundancy costs and restructuring The lack of progress in sales of the Nucleoplex and Nucleopure instrumentssystems resulted in cessation of continued research, development, sales andmarketing activities associated with these products in 2004. The Group providedat 31 December 2004 a total of £547,000, comprising £506,000 for write down ofstocks of the Nucleopure and Nucleoplex instruments held at 31 December 2004,and £41,000 for redundancy costs for people employed directly or indirectly onthese projects. These exceptional items give rise to an unprovided deferred tax asset of£164,000 because of the availability of tax losses. 3 Loss per share The weighted average number of shares in issue during the year was 213,021,836(Year ended 31 December 2004: 148,403,632). The loss per share has beencalculated on losses of £1,905,000 (Year ended 31 December 2004: £2,242,000).The basic and dilutive loss per share are the same at 0.9p (2004: 1.5p) becauselosses have been incurred which result in all potentially dilutive shares beingtreated as antidilutive. 4 Reconciliation of Movements in Shareholders' Funds 31 December 31 December 2005 2004 £'000 £'000Loss for the financial period (1,905) (2,242)Other recognised losses in the period 14 (36)Issue of shares (including premium) 17 4,758Share issue costs (1) (816)Net (reduction)/increase in shareholders' funds (1,875) 1,664Opening shareholders' funds 7,559 5,895Closing shareholders' funds 5,684 7,559 5 Additional Financial Information Reconciliation of operating loss to loss before interest, tax, depreciation,amortisation (LBITDA) and exceptional items 31 December 2005 31 December 2004 £'000 £'000Operating loss (1,899) (2,281)Exceptional items 975 547Depreciation 555 596Amortisation 197 56LBITDA pre exceptional items (172) (1,082) 6 Dividends The directors do not recommend the payment of a final dividend. 7 Accounting policies The Group has implemented FRS 21: Events after the Balance SheetDate, FRS 22: Earning per Share, the presentational requirements of FRS 25:Financial Instruments and FRS 28: Corresponding Amounts. FRS 25 has beenadopted with full retrospective application. There has been no change tocurrent year or prior year financial statements in respect of the implementationof these standards. All other accounting policies used are consistent withthose applied in the latest published Group accounts. The preliminary results for the year ended 31 December 2005 havebeen approved by the directors. Our auditors have issued an unqualified auditreport on the results for the year ended 31 December 2005 under section 235 ofthe Companies Act 1985. The accounts for the year ended 31 December 2005 willbe delivered to the Registrar of Companies in due course. The financialinformation set out above does not constitute statutory accounts within themeaning of section 240 of the Companies Act 1985. Enquiries: For Further Information: Tepnel Life Sciences plcBen Matzilevich, CEO0161 946 2200 Seymour PierceMark Percy, Corporate Finance0207 107 8000 De Facto CommunicationsRichard Anderson020 7861 3838 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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