15th Mar 2007 07:00
Tepnel Life Sciences PLC15 March 2007 TEPNEL LIFE SCIENCES PLC Preliminary results for the year ended 31st December 2006 Manchester, UK, 15th March 2007: Tepnel Life Sciences plc (AIM: TED), theinternational molecular diagnostics and research products and services group,announces preliminary results for the year ended 31st December 2006 and reportsits maiden profit. 2006 Highlights • 19% increase in annual sales to £16.16 million, up from £13.60 million in 2005 • Gross profit increase of 34% to £8.49 million with the gross margin increasing to 53% from 47% in 2005 • Pre exceptional EBITDA for the year increased to £0.92 million, from a loss of £0.17 million in 2005 • Achieved the Group's first operating profit (pre exceptionals) of £0.21 million in 2006, up from an operating loss (pre exceptionals) of £0.92 million in 2005 • Achieved operating profit after exceptionals of £0.08 million compared to loss of £1.9 million in 2005 • Improved operating cash inflow of £0.05 million from an operating cash outflow of £0.17 million in 2005 • Continued focus on operational synergies driving margin expansion • Substantial organic growth from both divisions leading to the Group achieving its first year of profitability Results Year ended Year ended Change 31 Dec 2006 31 Dec 2005 £'000 £'000 Group turnover 16,156 13,602 + 19% EBITDA (pre exceptionals) 922 (172) +£1.09m EBIT (pre exceptionals) 206 (924) +£1.13m EBIT 84 (1,899) +£1.98m Profit/(loss) after tax 175 (1,905) + £2.08m Basic EPS 0.08 pence (0.89) pence + 0.97 pence Gross margin 53% 47% + 6% Commenting on Tepnel's full year results, Ben Matzilevich, CEO, said: "2006 has been a milestone year for Tepnel as it announces its first full yearof profitability. This record financial performance reflects the success ofTepnel's operational strategy and I firmly believe the Company is well placed tocontinue to substantially grow the business from these levels". For further information, please contact: Tepnel Life Sciences plc Capital MS&LBen Matzilevich, CEO Mary Clark or Halina KukulaTel: +44 161 946 2200 Tel: +44 20 7307 5330 Seymour Pierce Mark Percy Tel: +44 20 7107 8000 Notes to Editors About Tepnel Life Sciences plc Tepnel Life Sciences (AIM:TED) is a UK-based international life sciencesproducts and services group with two divisions, Molecular Diagnostics andResearch Products & Services. The Company has laboratories, manufacturing andoperations in the USA, UK and France with 195 employees. Tepnel provides testkits, reagents and services to two highly synergistic markets, these beingMolecular Diagnostics and Biomedical Research. The company's strategy has beento identify high growth niche opportunities within these multi-billion poundmarkets. Tepnel focuses on these niche operations with internally developedproducts, patents, expertise and know-how as well as strategic acquisitions, todevelop a leadership position within these defined market segments. Chairman's Statement This year has been a highly successful one for Tepnel which has resulted in amaiden operating pre-exceptional profit of £0.21m on turnover of £16.16m. The performance in 2006 is a direct result of Tepnel's corporate strategy tobuild leadership positions in attractive niche markets in the moleculardiagnostics and research products and services sectors. The Group continues to reap the benefits of the strategic reorganisation of thebusiness in 2005 and the successful integration of its acquisitions has allowedTepnel to exploit operational and sales and marketing synergies in advance ofthose anticipated. Research Products and Services The Research Products and Services division has delivered strong sales growthwith turnover increasing 24% on 2005. This division provides outsourcingservices for the pharmaceutical, biotechnology and healthcare industries, foodtesting products and services and immunological reagents. Our client basecontinues to grow and includes many of the top 20 pharmaceutical companies. Tepnel is now firmly established as one of the largest providers of Nucleic AcidPurification (NAP) and analysis services in Europe and during the year deliveredmajor contracts for large pharmaceutical companies, and expanded its customerbase significantly. This included signing two major agreements with Pfizer andAstraZeneca. The increase in customer demand for our outsourced services has made essentialthe construction of the new state-of-the-art pharmaceutical testing facility inLivingston, Scotland. Construction began in July 2006 and the facility isscheduled to be fully operational by July 2007. The new facility will allow usto add further capacity, develop additional services and strengthen our positionin the genomic and protein analysis sectors. Our food safety business delivered good growth during the year and we sawsignificant improvements in US sales. This was driven by the establishment ofdirect sales and marketing capabilities, together with a complete range ofinventory, in the US. In 2006, a range of new ELISA and RAPID 3-D food allergenkits were launched leaving the business well placed for growth in 2007. In December 2006, Tepnel signed a global licensing agreement with the world'slargest online supplier of antibody products, Abcam, for the distribution of ourimmunological reagents. The move significantly extends Tepnel's reach and willprovide immediate access to a broad range of customers from both academia andindustry. Molecular Diagnostics The Molecular Diagnostics division continues to see strong growth with a 15%increase in sales for the year. This division is focusing on the growth marketsof organ transplant monitoring, foetal distress diagnosis and geneticpredisposition testing. Tepnel's innovative product range includes the Lifematchtransplant monitoring assays and the ELUCIGENE genetic predisposition assays. The Lifematch range of products, based on the highly multiplexed Luminexplatform, continues to perform strongly in the market place capturing additionalmarket share and delivering sales growth of over 40% compared to the prior year. There were two major product launches during the year: Donor SpecificAnitbodies (DSA), novel assays for the detection of antibodies which can be usedin pre-transplant antibody detection, and the Lifecodes Single Antigens (LSA)assays, which improve antibody detection in patients prior to solid organtransplant through increased sensitivity and specificity. These product launcheswill help Tepnel to achieve its aim of being a market leader in the organtransplant monitoring market. The ELUCIGENE QST*R product, launched throughout Europe in March 2006, continuesto gain momentum and is now used in 30 laboratories in over 15 countries. TheDNA-based assay is used for the rapid detection during pregnancy of commongenetic abnormalities, including Down syndrome, Edwards syndrome and Patausyndrome. The diagnostic test is a highly sensitive and rapid test that canprovide results within 4 hours, compared with 12-14 days needed for currentstandard tests. The test has been approved for in-vitro diagnostic use in Europeand Canada, and further regulatory approvals are in process. Financial results Turnover for the year increased by 19% to £16.16m (2005: £13.60m) with doubledigit growth across both operating divisions. Research Products and Servicesgenerated a 24% increase to £7.28m (2005: £5.88m) and Molecular Diagnostics grewby 15% to £8.88m (2005: £7.72m), now comprising 45% and 55% of group turnoverrespectively. Sales to Asia represented the largest growth as a market, growing from 4% to 11%of Group turnover in 2006, while 85% of the Group's revenues continue to bederived from the key markets of the US, UK and the rest of Europe. Operating profits before interest, tax, depreciation, amortisation (EBITDA) andexceptional items for the year ended 31 December 2006 were £0.92m compared tolosses on the same basis of £0.17m in the previous year (See Note 5). Operatingprofit pre-exceptional items was £0.21m compared to losses on the same basis of£0.92m in 2005. The retained profit for the year after taxation was £0.18m(2005: retained loss of £1.91m). Basic earnings per share for the year were 0.08 pence (2005: basic loss pershare of 0.89 pence). Net cash inflow from operating activities of £0.05m was reported, havingreported a net outflow of £0.17m in the previous year. Cash balances at 31December 2006 amounted to £3.86m (2005: £2.28m) with net funds of £2.26m (2005:£2.26m). Net assets at the year end totalled £6.97m, up from £5.68m at theprior year end. Overall, Tepnel has continued to record strong year on year growth in sales andgross profits. Importantly, the Group has achieved its first full year ofprofitability along with improving operating cash flows and a strong balancesheet. Future Prospects Following the strategic reorganisation and integration of the businessesacquired in 2004, the Group has significantly improved its year on yearperformance. The Group is focusing its Molecular Diagnostic division into key growth markets,principally organ transplant monitoring and foetal distress diagnostics. Thestrategic objectives for Molecular Diagnostics include expanding the productlines for pre and post operating transplant monitoring assays with the aim ofbecoming a market leader in this sector. The division is also focusing ondeveloping molecular diagnostics for the highly mutated multi gene diseasestates within the ELUCIGENE and QST*R lines. The Research Products and Services division is focused on expanding itscapabilities in the development of assays and services in immunology,genotyping, food allergens and protein analysis. The new laboratory will beused to develop epigenetic and genotyping capabilities to increase our marketshare in these areas. Current Trading Tepnel has made a good start to the new financial year. The Board is confidentthe Group will report continued improvements in its performance in 2007. Alec CraigNon-Executive Chairman15 March 2007 Consolidated Profit and Loss Account for the year ended 31 December 2006 Note Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Turnover 1 16,156 13,602Cost of sales - normal (7,663) (6,718) - exceptional 2 - (556)Total cost of sales (7,663) (7,274)Gross profit 8,493 6,328Administrative expenses - normal (3,857) (3,528) - exceptional 2 (122) (419)Total administrative expenses (3,979) (3,947)Research and development (1,775) (1,738)Sales and distribution costs (2,655) (2,542)Operating profit/(loss) 84 (1,899)Interest receivable 80 89Interest payable (143) (205)Profit/(loss) on ordinary activities before taxation 1 21 (2,015)Taxation on profit/(loss) on ordinary activities 154 110Profit/(loss) for the financial period 4 175 (1,905)Basic earnings/(loss) per share 3 0.08p (0.89p)Diluted earnings/(loss) per share 3 0.08p (0.89p) Operating profit/(loss) excluding exceptional items 206 (924) Consolidated Statement of Total Recognised Gains and Losses for the year ended31 December 2006 Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Profit/(loss) for the financial period 175 (1,905)Currency translation differences on retranslation of (58) 14subsidiary undertakingsTotal gains/(losses) recognised since last annual 117 (1,891)report All items dealt with in arriving at operating profit/(loss) above relate tocontinuing operations. Consolidated Balance Sheet at 31 December 2006 Note 31 December 2006 31 December 2005 £'000 £'000Fixed assetsIntangible assets 1,590 1,665Tangible assets 2,246 1,500 3,836 3,165Current assetsStocks 2,645 2,247Debtors 3,243 3,140Cash at bank and in hand 3,857 2,279 9,745 7,666Creditors: amounts falling due within one year (5,303) (4,937)Net current assets 4,442 2,729Total assets less current liabilities 8,278 5,894Creditors: amounts falling due after more than one year (1,307) (20)Provisions for liabilities and charges - (190)Net assets 1 6,971 5,684 Capital and reservesCalled up share capital 2,302 2,132Share premium account 34,576 33,601Profit and loss account (29,907) (30,049)Shareholders' funds 4 6,971 5,684 Consolidated Cash Flow Statement for the year ended 31 December 2006 Consolidated cash flow statement Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Net cash inflow/(outflow) from operating activities 45 (171)Return on investments and servicing of finance 58 75Taxation 73 90Capital expenditure and financial investment (1,213) (230)Acquisitions (39) -Net cash outflow before management of liquid resources and (1,076) (236)financingFinancing 2,474 (41)Increase/(decrease) in cash 1,398 (277) Reconciliation of operating profit/(loss) to net cash inflow/ Year ended Year ended(outflow) from operating activities 31 December 31 December 2006 2005 £'000 £'000 Operating profit/(loss) 84 (1,899)Depreciation 509 555Impairment - 84Amortisation 207 197Loss on disposal of fixed assets - 25Share based payment 25 -(Increase)/decrease in stocks (547) 101Increase in debtors (221) (336)(Decrease)/increase in creditors (12) 1,102Net cash inflow/(outflow) from operating activities 45 (171) Reconciliation of net cash flow to movements in net funds Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Increase/(decrease) in cash 1,398 (277)Cash outflow from decrease in lease financing 36 144Cash inflow from increase in debt (1,234) -Changes in net funds resulting from cash flow 200 (133)Inception of finance leases (177) (20)Exchange differences (20) 14Net funds at beginning of year 2,259 2,398Net funds at end of year 2,262 2,259 Notes: 1 Segmental analysis Turnover, profit/(loss) before taxation and net assets by business segment: Year ended 31 December 2006 Research Products and Molecular Services Diagnostics Total £'000 £'000 £'000Turnover 7,275 8,881 16,156 Segment profit 675 493 1,168Central costs (including £122,000 exceptional costs) (1,084)Net interest payable (63)Profit before taxation 21 Net assets 5,501 1,470 6,971 Year ended 31 December 2005 Research Products and Molecular Services Diagnostics Total £'000 £'000 £'000 Turnover 5,881 7,721 13,602 Segment (loss)/profit pre exceptional costs (361) 352 (9)Segment exceptional costs (312) (473) (785)Segment loss (673) (121) (794)Central costs (including £190,000 exceptional costs) (1,105)Net interest payable (116)Loss before taxation (2,015) Net assets 4,246 1,438 5,684 Turnover, profit/(loss) before taxation and net assets by geographical segment: Year ended Year ended 31 31 December 2006 December 2005 £'000 £'000Turnover by geographical destination:UK 4,628 3,861Rest of EU 4,106 3,494US 4,944 4,139Asia 1,699 595Rest of World 779 1,513 16,156 13,602 Turnover by geographical origin:UK 6,868 5,741Rest of EU 1,532 1,404US 7,756 6,457 16,156 13,602 Profit/(loss) before taxation by geographical segmentUK (314) (1,465)Rest of EU 222 171US 113 (721) 21 (2,015) Net assets by geographical segmentUK 3,362 2,424Rest of EU 1,836 2,240US 1,773 1,020 6,971 5,684 2 Exceptional items Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000Cost of sales - exceptional itemsProvision for slow moving/obsolete stock lines2 - 556 - 556Administrative expenses - exceptional itemsUnfair dismissal claim1 122 190Fixed asset impairment3 - 84Legal and other charges4 - 145 122 419Total exceptional items 122 975 1 Unfair dismissal claim On 29 November 2005, the Group terminated the employment contract of Mr G PFfoulkes Davies, Group Finance Director. Mr G P Ffoulkes Davies had brought aclaim for unfair dismissal in the Manchester Employment Tribunal and a defenceto this action had been filed. The Group made a provision of £190,000 againstany potential award against the Group for unfair dismissal and any action thatmay have been brought in respect of breach of contract in 2005. On 24 May 2006, the Group settled the unfair dismissal claim. The £122,000charge reflects the settlement made in excess of the provision made in 2005 aswell as associated legal costs incurred. As part of this settlement Mr G PFfoulkes Davies paid in full the outstanding unpaid share capital of £134,500 on3,000,000 shares purchased in 2004, together with the interest accrued on thisamount. 2 Provision for slow moving/obsolete stock lines The exceptional charge for slow moving and obsolete stock was £556,000. TheGroup is constantly improving and developing its product range and during 2005 areview of all stock lines across the Group was undertaken and provision made forslow moving or obsolete lines. In particular, the success of sales of theLifematch HLA system has led to slower sales of its RFLP HLA products. Themajority of the provision related to individual stock items within this productline which were acquired with the acquisition of Tepnel Lifecodes. 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 2005 and the total of the impairment charge was £84,000. 4 Legal and other charges The Group had exceptional legal and other charges during 2005 of £145,000.These principally relate to corporate finance and distribution agreementsadvice, but also included lease dilapidation and grant repayment charges. 3 Earnings/(loss) per share Basic earnings/(loss) per share is calculated by dividing net profit/(loss) forthe year that is attributable to the ordinary equity shareholders of the Group,by the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share is calculated by dividing the net profit/(loss) for the year that is attributable to the ordinary equity shareholders ofthe Group, by the weighted average number of ordinary shares outstanding duringthe year plus the weighted average number of ordinary shares that would beissued on the conversion of all dilutive potential ordinary shares into ordinaryshares. 2006 Earnings Weighted Earnings per Average share No of Shares £'000 000'sBasic EPS 175 222,884 0.08pDilutive effect of securities - Options - 1,222 - - 227 -WarrantsDiluted EPS 175 224,333 0.08p 2005 Earnings Weighted Earnings per Average share No of Shares £'000 000'sBasic EPS and Diluted EPS (1,905) 213,022 (0.89p) The basic and dilutive loss per share are the same in 2005 at 0.89p becauselosses have been incurred which result in all potentially dilutive shares beingtreated as anti-dilutive. 4 Reconciliation of Movements in Shareholders' Funds 31 December 31 December 2006 2005 £'000 £'000Profit/(loss) for the financial period 175 (1,905)Currency translation differences on retranslation of (58) 14subsidiary undertakingsShare based payments 25 -Issue of shares (including premium) 1,192 17Share issue costs (47) (1)Net increase/(reduction) in shareholders' funds 1,287 (1,875)Opening shareholders' funds 5,684 7,559Closing shareholders' funds 6,971 5,684 5 Additional Financial Information Reconciliation of operating profit/(loss) to profit/(loss) before interest, tax,depreciation, amortisation (EBITDA) and exceptional items 31 December 2006 31 December 2005 £'000 £'000Operating profit/(loss) 84 (1,899)Exceptional items 122 975Depreciation 509 555Amortisation 207 197EBITDA pre exceptional items 922 (172) 6 Dividends The directors do not recommend the payment of a dividend. 7 Accounting policies The Group has implemented FRS 20: Share Based Payments during the year and takenadvantage of the transitional provisions in respect of share based paymentsgranted and fully vested before 1 January 2006. There has been no change toprior year financial statements in respect of the implementation of thisstandard. The impact of adopting FRS 20 in the current year, has resulted in acharge to the profit and loss account of £25,000. All other accounting policiesused are consistent with those applied in the latest published Group accounts.'1 The preliminary results for the year ended 31 December 2006 havebeen approved by the directors. Our auditors have issued an unqualified auditreport on the results for the year ended 31 December 2006 under section 235 ofthe Companies Act 1985. The accounts for the year ended 31 December 2006 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TED.L