15th Jun 2006 07:07
Provexis PLC15 June 2006 PROVEXIS plc ("Provexis" or the "Group") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Provexis plc the nutraceutical company that develops scientifically-provenfunctional and medical foods, announces its unaudited preliminary results forthe year ended 31 March 2006. Financial Highlights • Results in-line with expectations • Sales of lead product SircoTM of £140,000 in first 3 months since launch • Total turnover of £268,000, decreased by 56 per cent. (2005: £609,000); mainly due to the decrease of a one time non recurring fee paid by Nutrinnovator Holdings to Provexis Limited in the prior year • Adjusted loss before interest, goodwill amortisation, share compensation expense and tax of £2,528,000, increased by 320 per cent. (2005: £601,000) • Cash balance £2,166,000 (2005: £1,106,000) Operational Highlights • Completion of reverse takeover of Nutrinnovator Holdings plc, placing and admission of Provexis plc to trading on AIM • Lead product SircoTM launched in major UK supermarkets in January 2006 • US patent granted for FruitflowTM technology • Product endorsement agreement with HEART UK for lead product SircoTM • Independent Expert Panel in United States affirmed that FruitflowTM technology is Generally Recognised as Safe ("GRAS"), paving the way for products containing FruitflowTM to be marketed in the North America • Collaboration agreement with leading global clinical nutrition company for the development of Provexis' Crohn's disease technology • Awarded £180,000 research grant for Crohn's Disease Technology from North West Development Agency Post year-end achievements • International scientific endorsement for clinical efficacy of SircoTM from the highest-ranked peer-reviewed journal in the nutrition field • Single serve 250ml bottle of SircoTM to be launched on schedule this summer, initially in 150 Holland and Barratt stores with further distribution in independent health food stores • Licence negotiations for FruitflowTM technology at an advanced stage • Secured a Standby Equity Distribution Agreement with a capital provider for £3 million, to be utilised at our discretion Dr Stephen Franklin, Chief Executive Officer of Provexis plc, commented: "In line with our targets, we have succeeded in launching our lead productSircoTM into major retailers in the UK. Furthermore, in the United States, ourFruitflowTM technology has secured a vital patent grant and has made asignificant advance towards its regulatory clearance. The FruitflowTM technologyhas also received a major scientific endorsement by being accepted forpublication by the highest ranked peer reviewed journal in the nutrition field. These achievements are major milestones in the development of the company andunlock significant global commercial opportunities. Negotiations regarding thelicensing of the FruitflowTM technology are at an advanced stage and furtherdetails will be announced in due course. In addition to the progress made with our lead product SircoTM and theFruitflowTM technology we have also continued development of our productpipelines with two other technology platforms - a glucosinolate-enrichedbroccoli extract to reduce the risk of specific types of cancer, and a patentedplantain based extract for the treatment of Crohn's Disease. I am pleased with the progress that the Company has made since its admission toAIM in June 2005 and believe that the Company is well-positioned to continue itsgrowth during the next 12 months and to capitalise on worldwide opportunities inthe rapidly growing functional food market." -ends- For further information please contact: Stephen Franklin, Chief ExecutiveProvexis plc Tel: 020 8392 6631 Victoria GeogheganBell Pottinger Corporate & Financial Tel: 020 7861 3232 Tom Griffiths/Richard Dunn Arbuthnot Securities Limited Tel: 020 7012 2000 Chairman's statement The Company has made considerable progress in the year ended 31 March 2006.Since the reverse takeover of Nutrinnovator Holdings plc, we have successfullyintegrated the two businesses whilst remaining focussed on the delivery ofseveral major milestones. Provexis combines excellent scientific, marketing andsales talent which enables us to develop and commercialise new functional foodtechnologies via a combination of licensing and new brands. In 1998, Professor Asim Dutta-Roy made the discovery that the clear fraction oftomatoes contained compounds that inhibited blood platelet aggregation, therebyhelping to maintain a smooth blood flow and as a result maintain a healthy heartand circulation. After seven years of development, it has been extremelyrewarding during this period to witness the emergence of this technology in themarket place. The technology is now known as FruitflowTM, and the first productto contain this bioactive is the fruit juice drink, SircoTM. SircoTM, endorsedby the charity HEART UK, was launched on schedule in major UK supermarkets inJanuary 2006. We are encouraged by the steady increase in the rate of sale of SircoTM andfavourable performance benchmarks against other functional fruit juices in themarket. In Tesco, we are encouraged by the fact that SircoTM now enjoys a rateof sale which is comparable to many more established brands. SircoTM has been strategically important to Provexis as a demonstrable exampleof the FruitflowTM technology in action and there is little doubt that launch ofthe brand in the UK has facilitated global licensing discussions with major foodand beverage companies. The Directors believe a successful licensing strategy,across foods, supplements and medical products, is central to maximising thevalue from the FruitflowTM technology and I am pleased with the advanced statusof these negotiations. We recently received notice from the American Journal of Clinical Nutrition("AJCN") that they have accepted for publication two scientific papers whichdetail the clinical efficacy of SircoTM. The AJCN is internationally recognisedas the highest ranked peer-reviewed journal in the nutrition field and thisrepresents a major endorsement for the technology. This development is key toimplementing an effective and credible PR campaign and over the coming monthsactivity in this area will be escalated. In conjunction with the University of Liverpool and Professor Jon Rhodes, theCompany continues to develop a medical food, based on a patented extract fromthe plantain banana, for the dietary management of Crohn's disease, a conditionfor which there is currently no cure. We also entered into a collaboration witha global clinical nutrition company and secured a substantial research grantfrom the North West Development Agency. The product enters clinical trials, onschedule, this summer. Provexis continues to work closely with Plant Bioscience Limited theintellectual property arm of The Institute of Food Research in Norwich, todevelop a functional food product enriched in cancer-protective compoundsextracted from broccoli. The functional food sector continues to grow strongly in all major marketsworldwide and I believe that Provexis, with its evidence-based approach, isuniquely positioned to be a significant source of innovation for the industry.We look forward to making yet further progress during the next year. Dawson BuckChairman Management review The Provexis business model is to develop patented extracts from food which haveclinically proven health benefits. The intention is to commercialise thesetechnologies in the functional food and medical food markets via a combinationof new brand development and licensing to major brand-holding food and clinicalnutrition companies. Year's highlights During the year ended 31 March 2006 we have made considerable progress with ourtechnology pipeline and, importantly, have also integrated the two businessesfollowing the reverse takeover of Nutrinnovator last summer. The launch of our lead product SircoTM in the UK, on schedule in January 2006,represented an important milestone in the Company's progress. The SircoTMtrading business is significant in its own right, but the wider ambition for thelaunch was to act as a catalyst for the global commercialisation of theunderpinning FruitflowTM technology. We have made very encouraging progress inlicensing negotiations, some of which are at an advanced stage, with major foodand beverage companies. In addition to the successful development of our lead product, the Company alsosecured a US patent for the FruitflowTM technology and subsequently an ExpertPanel in the United States affirmed that the ingredient was GRAS. These are twocritical developments in realising our licensing ambitions and enabling us topenetrate our largest target market with FruitflowTM containing products. The USfunctional food market is expected to reach US$34 billion of sales by 2010. Financial Review Total turnover for the Group for the year ended 31 March 2006 was £267,660.Group turnover from continuing operations was £139,972 for the year ended 31March 2006, arising from the sale of SircoTM. SircoTM was launched in three ofthe UK's supermarket chains during the first quarter of 2006. Group turnoverfrom discontinued operations for the year ended 31 March 2006 was £127,688. The turnover decrease from continuing operations of 55 per cent. for the yearended 31 March 2006 compared to the year ended 31 March 2005 was principally dueto the one-off fee of £310,000 paid by Nutrinnovator Holdings plc to ProvexisLimited in the year ended 31 March 2005 partially offset by sales from thelaunch of Sirco during the fourth quarter of fiscal 2006. The turnover decrease from discontinued operations of 57 per cent. for the yearended 31 March 2006 compared to the year ended 31 March 2005 is due to the saleof the Altu food bar business on 4 October 2005. Other administration expenses for the year ended 31 March 2006 were £2,940,992compared to £1,441,158 for the year ended 31 March 2005. The increase was due toincreased overheads for the new group following the reverse acquisition in June2005. In addition, exceptional re-organisation costs of £119,850 have beencharged to the profit and loss account. Operating loss before interest and taxation from continuing operations for yearended 31 March 2006 totalled £3,346,385 compared to an operating loss of£1,106,715. The increase in operating loss is mainly due to the decrease inrevenues for the year and the new group structure following the reverseacquisition of Provexis Limited in June 2005. Share option compensation expenseof £455,446 was charged to the profit and loss account during the year inconnection with share options granted at exercise prices that were lower thanmarket price on the date of grant. Also, included in operating loss isamortisation of goodwill arising from the reverse acquisition of ProvexisLimited in the amount of £363,264. Operating loss before interest and taxation from discontinued operations for theyear ended 31 March 2006 totalled £172,003. The Altu food-bar business was soldto Altu Limited, trading as Go Lower Limited in October 2005. A provision of£32,756 was recorded in September 2005 in connection with certain write-offsfollowing the sale of the Altu business. Cash at bank as at 31 March 2006 was £2,166,243 compared to £1,105,689. Tostrengthen liquidity and capital resources the Company has secured a StandbyEquity Distribution Agreement with a capital provider for £3 million. Under theagreement the Company may, at its discretion and throughout its term, sellOrdinary shares up to the amount of £3million. SircoTM heart health juice During the period the industrial scale manufacturing process for the FruitflowTMingredient was finalised and the Company has successfully developed and launchedSircoTM, the first heart health drink to contain the active ingredient.FruitflowTM works by reducing blood platelet aggregation, a significantcontributing factor to a thrombosis (internal blood clot) which can cause heartattack or stroke. SircoTM was launched during January 2006 in Tesco, Sainsbury's and Waitrose.Since the year end Sainsbury's has de-listed SircoTM as part of its wide rangingrationalisation of chilled juice brands reducing the distribution base. However,the product continues to be sold in 550 Tesco stores and 120 Waitrose stores,and we are witnessing an increasing rate of sale in both. In particular, thesteady growth of rate of sale in Tesco is encouraging and is comparable to manyof the more established brands. Licensing of FruitflowTM technology The Company is implementing a global licensing strategy for the FruitflowTMtechnology in different areas of application ranging from food and supplementsto medical categories. Negotiations are at an advanced stage with global food companies and furtherdetails will be announced in due course. Altu food bar During the period, we completed the disposal of the Altu food-bar business inorder to focus on the core business of developing and commercialising functionalfoods. New product development The Company entered into a collaboration agreement with a global clinicalnutrition company in order to facilitate the development of a novel medicalfood, based on a patented extract from plantain, for the dietary management ofCrohn's disease. Crohn's disease is a chronic, relapsing disease of theintestine which affects 1 in a 1000 people in the UK. The disease is incurableand management of the condition is currently restricted to various drug regimesand surgery. Furthermore, the Company secured a £180,000 research grant, after acompetitive pitch, from the North West Development Agency. We continue to work closely with the technology transfer organisation of TheInstitute of Food Research to develop a bioactive ingredient, sourced frombroccoli, associated with a reduced risk of developing certain types of cancer.We are currently reviewing the relative merits of launching a new brand in theUK followed by a global licensing strategy, or alternatively moving straight tolicensing arrangements. The Group is eighteen months into a three year technology acquisition agreementwith Plant Bioscience Limited who continue to access their global network of 35research institutes to find further functional food opportunities. Outlook In summary, we have made good progress during the period and met the milestonesthat we set out to achieve at the time of our admission to AIM. The prospectsfor the next twelve months are very encouraging. Most recently we have securedanother vital endorsement from the most highly regarded peer-reviewedpublication in the field of nutrition, the AJCN. This represents a majorvalidation of the quality of the science behind FruitflowTM. We are delighted to announce that the single-serve 250ml version of SircoTM willbe launched this summer, on schedule, in independent health food stores and aninitial distribution base of 150 Holland and Barrett stores. We remain inongoing discussions with a number of retailers regarding new listings for boththe existing 1 litre and the new 250ml format. We are currently in a very important period for the business with regard tosecuring the first licensing agreement for the FruitflowTM technology andthereby validating our business model. We remain confident of securing the firstof these arrangements in the short-term and believe that the Company is wellpositioned to take advantage of the increasing global demand for functionalfoods. Stephen FranklinChief Executive Officer Unaudited consolidated profit and loss account for the year ended 31 March 2006 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total 2006 2006 2006 2005 2005 2005 Unaudited Unaudited Unaudited Audited Audited Audited £ £ £ £ £ £ Turnover 139,972 127,688 267,660 310,000 298,667 608,667 Cost of sales (111,646) (100,091) (211,737) (246,709) (222,985) (469,964) -------- --------- -------- -------- --------- ------- Gross profit 28,326 27,597 55,923 63,291 75,682 138,973 -------- --------- -------- -------- --------- -------- Distributioncosts (10,968) (14,299) (25,267) - (30,821) (30,821) -------- --------- -------- -------- --------- --------Administrativeexpenses -other (2,788,447) (152,545) (2,940,992) (664,370) (776,788) (1,441,158)Administrativeexpense -Re-organisationcosts (119,850) - (119,850) - - - Share optioncosts (455,446) - (455,446) (505,636) - (505,636) -------- --------- -------- -------- --------- -------- -------- --------- -------- -------- --------- --------Totaladministrativeexpenses (3,363,743) (152,545) (3,516,288) (1,170,006) (776,788) (1,946,794) -------- --------- -------- -------- --------- -------- Operating loss (3,346,385) (139,247) (3,485,632) (1,106,715) (731,927) (1,838,642) Provision forloss ondisposal ofdiscontinuedoperations - (32,756) (32,756) - - - -------- --------- -------- -------- --------- -------- (Loss) onordinaryactivitiesbefore interest (3,346,385) (172,003) (3,518,388) (1,106,715) (731,927) (1,838,642) Interestreceivable 113,918 - 113,918 34,286 - 34,286 Interestpayable andsimilarcharges (6,500) - (6,500) (19,738) - (19,738) -------- --------- -------- -------- --------- -------- (Loss) onordinaryactivitiesbefore andafter taxation (3,238,967) (172,003) (3,410,970) (1,092,167) (731,927) (1,824,094) -------- --------- -------- -------- --------- -------- Loss for theyear (3,238,967) (172,003) (3,410,970) (1,092,167) (731,927) (1,824,094) ======== ========= ======== ======== ========= ======== Basic anddiluted lossper share £(0.02) £(0.11) ======== ======== All recognised gains and losses are included in the profit and loss account. Unaudited consolidated balance sheet at 31 March 2006 Note Unaudited Unaudited Audited Audited 2006 2006 2005 2005 £ £ £ £ Fixed assetsIntangible assets 6,902,013 -Tangible assets 16,517 11,455 --------- --------- 6,918,530 11,455 Current assetsStocks 17,963 47,243Debtors 548,625 288,984Cash at bank and inhand 2,166,243 1,105,689 --------- --------- 2,732,831 1,441,916 Creditors: amountsfallingDue within one yearConvertible debt - (400,000)Other (801,763) (543,548) --------- --------- (801,763) (943,548) Net current assets 1,931,068 498,368 --------- --------- Total assets lesscurrentliabilities 8,849,598 509,823 Net assets 8,849,598 509,823 ========= ========= Capital and reserves 3Called up share capital 2,500,009 332,184Share premium account 10,444,355 1,335,192Merger reserve 1,137,616 1,137,616Share option reserve 808,977 420,903Profit and loss account (6,041,359) (2,716,073) --------- ---------Total shareholders' equity 8,849,598 509,823 ========= ========= Unaudited consolidated cash flow statement for the year ended 31 March 2006 Note Unaudted Unaudited Audited Audited 2006 2006 2005 2005 £ £ £ £ Net cash outflow fromoperating activities 4 (2,613,709) (1,247,519) Returns oninvestmentsand servicing offinanceInterest received 119,981 25,566Interest paid onconvertibleloan notes (6,500) (16,900)Interest element offinancelease rental payments - (238) --------- --------- Net cash inflow fromreturns on investmentand servicing of finance 113,481 (8,428) Capital expenditureandfinancial investmentPurchase of tangiblefixed assets (15,080) (2,282) Acquisitions and disposalsPurchase of ProvexisLimited 646,434 - --------- --------- Net cash outflowbefore financing (1,868,874) (1,241,373) Financing Issue of ordinaryshare capital 3,772,019 2,025,080Exercise of share options 3,725 1,884Cost of shares issues (845,694) (265,071)Capital element offinance lease rentalpayments (622) (1,769)Issue of convertibleloan notes - 400,000 --------- --------- Cash inflow from financing 2,929,428 2,160,124 ========= =========Increase in cash 5&6 1,060,554 918,751 ========= ========= Notes 1 Financial Information The financial information in this statement does not constitute the Company's statutory accounts for the year ended 31 March 2006 but is derived from those accounts. Statutory accounts for 2006 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information in this statement is unaudited. The accounts have been prepared on a going concern basis and the preliminary announcement of results for the year ended 31 March 2006 was approved by the directors on 15 June 2006. The Annual General Meeting of the Company will be held at the offices of PinsentMasons, Dashwood House, 69 Old Broad Street, London EC2M 1NR on Tuesday 29 August 2006 at 10.00 am. 2 Accounting polices The financial information has been prepared under the historical cost conventionand in accordance with applicable accounting standards. In preparing thefinancial information the Group has adopted acquisition accounting as set out inFinancial Reporting Standard (FRS) 6 "Acquisitions and Mergers". The financialinformation is presented in UK pounds as this represents the functional currencyof the Group. The following principal accounting policies have been applied: Basis of consolidation The consolidated financial statements incorporate the financial statements ofProvexis plc, and its wholly-owned and majority owned subsidiary undertakings,Provexis Nutrition Limited 100% ("PNL"), Provexis Natural Products Limited 100%("PNP"), Provexis (IBD) Limited 75% ("IBD") and Altucea Limited 94% ("ALT"), adormant company all of which are incorporated in England. All entities arereferred to as the "Group" and those operations exclusively of Provexis plc arereferred to as the "Company". The acquisition method of accounting is used to consolidate the results ofpurchased subsidiary undertakings in the group's financial statements. Share based employee remuneration When shares and share options are awarded to employees a charge is made to theprofit and loss account based on the difference between the market value of theCompany's shares at the date of grant and the option price in accordance withUITF Abstract 17 (Revised 2003) 'Employee Share Schemes'. The credit entry forthe charge is taken to the profit and loss reserve and reported in thereconciliation of movements in shareholder' funds. National Insurance on Share Options To the extant that the share price at the balance sheet date is greater than theexercise price on options granted after 19 May 2002, provision for any NationalInsurance contribution has been made based on the prevailing rate of NationalInsurance. The provision is accrued over the performance period attaching to theaward. Turnover Turnover from sales of the Company's SircoTM product and the discontinued AltuTM product are recognised upon delivery which is generally the time of shipmentwhere legal title and risk of loss is transferred to the Group's customers, andis stated at the net invoiced value of goods supplied to customers afterdeduction of value added tax where applicable. Deferred taxation Deferred tax balances are recognised in respect of all timing differences thathave originated but not reversed by the balance sheet date except that therecognition of deferred tax assets is limited to the extent that the Groupanticipates making sufficient taxable profits in the future to absorb thereversal of the underlying timing differences. Deferred tax balances are not discounted. Intangible assets Goodwill is amortised on a straight line basis over its useful life of 15 years.Goodwill included in the consolidated financial statements relates to theGroup's acquisition on 24 June 2005 of Provexis Limited. Investments Investments are held at cost less any provision for an impairment in value. Tangible fixed assets Tangible fixed assets are stated at cost. Depreciation is calculated on astraight line basis so as to write off the cost less residual value of tangiblefixed assets by equal instalments over their useful economic lives as follows: Plant, machinery and vehicles - 3 years Fixtures, fittings and equipment - 3 years Research and development Expenditure on research and development is written off as incurred and includesa proportion of salaries and other expenses relating thereto. Stock Stock has been valued at the lower of cost and net realisable value. Pension costs Contributions to the Stakeholder pension plan are charged to the profit and lossaccount in the period in which they become payable. Financial instruments • short term debtors and creditors are not treated as financial assets or financial liabilities (other than for currency disclosures); • the Group does not hold or issue derivative financial instruments for trading purposes. Operating leases Operating lease rentals are charged on a straight-line basis to the profit andloss account over the term of the lease. Impairment of long-lived assets The carrying value of intangible assets is reviewed for impairment in valuewhenever events or changes in circumstances indicate that the carrying amount ofassets may not be recoverable. 3. Reserves Group Share Share Profit Premium Merger Option And loss Account Reserve Reserve Account £ £ £ £ At 1 April 2005 1,335,192 1,137,616 420,903 (2,716,073)Shares issues foracquisition of Provexis Ltd 5,136,293 - - -Share placing 3,101,504 - - -Shares issued for loansconversions 1,717,060 - - -Share issue costs (845,694) - - -Share option compensationexpense - - 473,758 -Share options exercised - - (85,684) 85,684Loss for the year - - - (3,410,970) -------- -------- ------- -------- At 31 March 2006 10,444,355 1,137,616 808,977 (6,041,359) ========= ======== ======= ======== 4. Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 £ £ Operating loss (3,485,632) (1,838,642)Depreciation and amortisation 378,691 8,057Decrease in stocks 29,280 14,648Increase in debtors (198,820) (223,040)Increase in creditors 189,014 327,225Share option compensation (UITF 17) 473,758 464,233 -------- -------- Net cash outflow from operating activities (2,613,709) (1,247,519) ======== ======== 5. Reconciliation of net cash inflow to movement in net funds 2006 2005 £ £ Increase in cash in the year 1,060,554 918,751Decrease (increase) in debt 400,000 (398,231) -------- -------- Change in net funds resulting from cash flows 1,460,554 520,520 -------- -------- Net funds at beginning of year 705,689 184,547 -------- -------- Net funds at end of year 2,166,243 705,067 ======== ======== 6. Analysis of net funds At At 1 April Cash 31 March 2005 Flow 2006 £ £ £ Cash at bank and in hand 1,105,689 1,060,554 2,166,243Obligations under finance leases (622) 622 -Convertible loan notes (400,000) 400,000 - -------- -------- -------- Total 705,067 1,461,176 2,166,243 -------- -------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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