24th May 2005 07:01
Celsis International PLC24 May 2005 CELSIS INTERNATIONAL PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2005 STRONG GROWTH CONTINUES AT CELSIS Embargoed until 7:00am 24 May 2005 Celsis International plc, the rapid microbial detection and analytical servicescompany, announces its preliminary results for the year ended 31 March 2005. Key Points • Turnover up 10.1% to $30.4 million (2004: $27.6 million) • Profits before tax up 19.1% to $5.75 million (2004: $4.83 million) • Operating margins rise to 18.9% (2004: 17.5%) • Diluted pre tax earnings per share up 17% to 5.09 cents (2004: 4.35 cents) • Strong cash position as of 31 March 2005 with $17.36 million (2004: $14.21 million) • Recommended dividend of 1.02 cents per share (2004: 0.86 cents) up 18.6% Jay LeCoque, Chief Executive Officer of Celsis, commented: "I am very pleased to announce another strong set of results, with substantialincreases in revenues, profits and dividends. Our Product Group continues toexpand globally across all market segments while also successfully expandinginto new areas such as vaccines. Our Laboratory Group built upon a strong firsthalf with orders increasing across its pharmaceutical and biopharma customerbase. "Looking forward, there are good prospects for further growth in the currentyear. We operate in expanding markets and have invested significantly in ourbusinesses to be able to supply the products and services our customers require.We are confident of further good progress this year." Enquiries: Celsis International plc Tel: 01638 600 151Jay LeCoque, Chief Executive Officer Tel: 020 7831 3113Christian Madrolle, Finance Director on 24 May 2005 Financial Dynamics Tel: 020 7831 3113Ben AtwellDavid Yates A presentation for analysts will be held at Financial Dynamics at 9.30am today,Tuesday 24 May 2005. Please call Mo Noonan at Financial Dynamics on 0207 2697116 for further details. Celsis International plc Celsis International plc is a rapid microbial detection and analytical servicescompany. The company is listed on the London Stock Exchange (CEL.L). Furtherinformation can be found on its website at www.celsis.com. Chairman and Chief Executive's Review Introduction During the past year, the markets for our products and services continued toexpand and our Product and Laboratory Groups again produced strong performances. We remain focused on bringing new technologies and services to our growingglobal customer base to help them improve their manufacturing productivity and R&D efficiencies. Using its proprietary enzyme technology, the Product Group is the world leaderin the provision of diagnostic systems for the rapid detection of microbialcontamination. It works in close collaboration with many of the world's leadingpharmaceutical, personal care and beverage companies, ensuring the safety andquality of products bound for consumers. The Laboratory Group providesoutsourced analytical testing services to pharmaceutical and biopharma companiesto ensure the stability and chemical composition of their products. In addition to ensuring product quality and safety for consumers, both divisionshave the capacity to deliver substantial cost savings to Celsis' customers. Byreducing the time it takes to test and release raw materials and finished goodsto the market place, Celsis' products facilitate increased manufacturingproductivity and improved supply chain management. For the year ended 31 March 2005, we are pleased to report both strong revenueand profit growth across the Group. Total Group revenue increased 10.1% to$30.4 million (2004: $27.6 million) and profit before tax increased 19.1% to$5.75 million (2004: $4.83 million). We continued to build our cash reserves to$17.36 million (2004: $14.21 million), whilst also investing in our growingbusinesses as well as strategically reviewing new areas of business opportunity. We see healthy, sustainable growth across both our businesses and remainconfident of the long-term prospects for the Company. Product Group Our Product Group, which provides rapid microbial detection systems to ensurethe safety and quality of products bound for consumers, represented 52% of totalGroup revenues this fiscal year. Celsis is the global leader in this businessand, as companies become increasingly concerned about the safety of theirproducts as well as the efficient management of their inventory, we are seeingan accelerating rate of adoption of our testing systems. Revenues increased12.7% to $15.8 million (2004: $14.0 million). Instrument sales wereparticularly strong in our first half, with follow-on reagent usage picking upstrongly in the second half. Reagents and consumables now represent over 80% ofProduct Group revenues. Our personal care and pharmaceutical business unit revenues increased 21% andnow represent 63% of Product Group revenues. We secured strong instrumentgrowth during our first half of the year as our large Global Corporate AccountManagement (GCAM) customer base continued to implement our rapid detectionsystems throughout their global manufacturing operations. Reckitt Benckiser isone important customer of note, which has been added to our GCAM platform.Growth in Asia and the rest of the world was impressive with progress into thenew EU countries also strong. We have recently launched our RapiScreenTM Biologics kit for the rapid microbialscreening of in-process vaccine manufacture which is targeted at assistingvaccine and other biologic manufacturers overcome these issues. Growth for thisnew testing system has been strong and we have secured MedImmune as one of ourinitial customers. MedImmune has now completed the validation of our system fortheir routine vaccine manufacture. In addition, we are working with severalother large vaccine producers and expect more news in the near term on thecontinued growth of this important new market segment. We have other customer related projects underway to expand the capabilities ofour new Biologics platform. We view this new biopharmaceutical customer base asan important and growing industry for our Product Group in the future. The costsavings offered by our rapid microbial detection systems are very significantwhen compared to the cost of contaminated biological materials and the issuesassociated with waiting for more traditional and non-rapid microbial testingprocedures. Our dairy business unit operates in a more difficult pricing environment butnevertheless managed to increase revenues by 6% as a result of the strongcustomer preference for our new InnovateTM testing system, coupled with our newinformation management system Innovate.imTM and RapiScreenTM Dairy testingsystem. Our new Innovate system leads the industry technically and has quicklybecome the industry standard for rapid microbial detection in the UHT and ESLdairy product industry. We are experiencing far stronger revenue growth in someregions, with North America and Asia being particularly strong in businessvolume increases this past year. In non-dairy beverage, our business has been growing rapidly and we were pleasedto secure a new placement at Coca-Cola's Brazil facility, which is one of thelargest facilities for Coke in Latin America. As with our dairy business, wehave combined our new InnovateTM and Innovate.imTM systems with our newRapiScreenTM Beverage testing system and seen substantial take-up by ourcustomers. As we manage this strong global expansion of our existing product platforms, weare also moving ambitiously into new areas where our rapid microbial testingsystems can add significant value to our customers' operations. In thevaccines market, for example, which is currently seeing a resurgence in growthas a result of recent advances made in biological research, the manufacturingprocess is by its nature easily prone to contamination and this can result inlarge scale stock write-offs and production shortages. As mentioned in our Interim results, we are also in discussion with some of theworld's leading clinical diagnostics companies to expand both our product rangeand technology base for rapid microbial detection beyond ATP bioluminescence.We remain convinced that technologies which have been developed for use inclinical diagnostics could be very useful to our customers in the industrialtesting arena. Our understanding of this customer base and our ability toleverage our global sales channel provide us with unique advantages in thedevelopment and commercialisation of such new product offerings. Laboratory Group Our Laboratory Group, which provides outsourced analytical testing services tothe pharmaceutical and biopharmaceutical industries to ensure the stability andchemical composition of their products, represented 48% of total Group revenuesthis fiscal year. Revenues grew 7.3% to $14.6 million (2004: $13.6 million) ascustomer orders remained solid after a strong first half. Our operatingstructure based around two business units, Chemical Sciences and BiologicalSciences, continues to allow the focus and specialisation required to meet theneeds of these two different but equally important customer segments. Our Chemical Sciences business unit represented 70% of our Laboratory Groupbusiness this fiscal year. Revenues increased 13% to $10.1 million (2004: $8.95million). The success of our highly focused business development team inexpanding our pharmaceutical and biopharma customer base has been a significantfactor in our Chemical Sciences strong growth this year. We re-secured one ofour largest customer contracts with Lonza Inc., as well as with other majorcustomer contracts and also added new customers such as Cardinal Health and JelSert, a contract manufacturer for Pfizer's Pediacare Business, to our growingChemical Sciences customer base. Our Biological Sciences business unit decreased (5%) to $4.4 million (2004: $4.6million) due to the sudden completion of a major water testing project and nosubsequent large customer contract to immediately replace this lost business.Excluding this lost customer revenue our remaining business was up 3%. We arecontinuing to focus on this more price sensitive business unit and haveconcentrated our business development resources toward higher margin services,such as specific microbial identification testing in the Biological Sciencesteam. In the first months of this new fiscal year, we have already seen much ofthis lost business replaced on a month to month basis. Our business growth demonstrates that our current customer focused strategiesare resonating strongly with our customer base. We remain focused on expandingour higher margin service offerings and will continue to develop our resourcebase accordingly to further our expertise in these areas. Financial Review As in the previous year our Group's foreign exchange policy has continued tomitigate currency fluctuations resulting from the relative strength of the Euroversus the US$ during most of the financial year under review. On average theEuro strengthened 7% against the US$ from 2003-2004 to 2004-2005. Although moremoderately than during 2003-2004 when it reached 18%, the adverse currencyimpact on our manufacturing and distribution Euro-denominated costs has beenonce again fully absorbed by the positive currency impact on Euro-denominatedrevenue when retranslated into US Dollars. The US$ continues to be the currency of reference to provide the best visibilityon the Group's overall performance, as a large component of Celsis' revenuesarises in the Americas and Asia. Results Both turnover and profit reached record levels this year. Total revenues forthe year ended 31 March 2005 were up 10.1% at $30.4 million against $27.6million the previous year and both the Product and Laboratory Groups reportedsignificant turnover growth. Group profit before taxation was up 19.1% to $5.75million and operating margins reached 18.9%, compared with a profit of $4.83million and margins of 17.5% the previous year. Earnings and Taxation The Group's profit after tax was $7.65 million, up 14.9% against a profit aftertax of $6.66 million the previous year. The Product Group and the LaboratoryGroup both contributed to the total earnings growth, although a significantlystronger contribution was made by the Product Group. Celsis has accumulated during its initial years of operations a significantamount of tax losses carried forward both in the UK and in the US. We startedtwo years ago to recognise that these accumulated tax losses represented anasset which would be recoverable in the coming years. A prudent approach hasbeen taken and the recognition of these assets has only been made graduallyagainst strong profitability forecasts. At the end of last year we hadrecognised all our UK tax losses and we started the year 2004-2005 with a totalof $3.56 million of recognised but still unutilised deferred tax assets relatedto tax losses carried forward. This year we have continued, as we did for the first time last year, to utiliseexisting tax losses and offset them by taxable profits. As the profit growth ofthe Company has continued both in Europe and in the US, we have decided torecognise all remaining tax losses as at 31 March 2005 and after allocation ofthe taxes arising out of this year profit before tax and marginal taxes of$0.342 million. We have booked a net deferred tax asset gain of $1.90 million. With this final deferred tax asset recognition, Celsis' balance sheet now showsa total amount of $6.00 million corresponding to all amounts deductible fromfuture tax liabilities and there is now a greater visibility in the future cashflow benefits from taxes not having to be paid for several years. The Board is recommending a dividend of 1.02 cent per share, an increase of18.6% over 2003-2004. After recognising the final deferred tax asset equity shareholders' funds havegrown 23.0% from $27.21 million to $33.47 million. Fully diluted pre-tax earnings for the year were 5.09 cents a share compared to4.35 cents a share the previous year, an increase of 17%. Fully diluted aftertax earnings for the year were 6.77 cents a share compared to 6.00 cents a sharethe previous year, an increase of 12.8%. Gross Margin Gross margins for the year under review have remained stable at 65.9% against65.8% last year. Operating Expenses Our operating costs increased 7.1% from $13.55 million last year to $14.51million this year. Sales and marketing expenses represented 33.7% of revenues,against 35.1% the previous year, as the strengthening of our sales and salesmanagement teams implemented last year has delivered the expected results.Administrative expenses remained almost flat at 11.6% of revenues versus 11.1%the previous year. Our research & development efforts have focused on the development of the newRapiScreen Biologics Kit and RapiScreen Beverage Kit. Our overall R&Dexpenditure has decreased slightly from $782,000 to $733,000. Increasedefficiencies, primarily in reducing lead times for introduction of new productsresulting from closer cooperation with the manufacturing operations, havecontinued to be achieved. Cash Flow Cash generation has continued to be strong across the Group with $7.09 millionof operating cash flow for this year, up from $6.5 million the previous year. Capital expenditure for the year to 31 March 2005 was $2.06 million, comparedwith the previous year's figure of $1.33 million, reflecting the investmentprogramme including new instrumentation, laboratory space extension in NewJersey, new R&D laboratory in Chicago and deployment of CRM and upgrade of ourERP software. We have invested significantly in the future of the Group this year to ensurethat future growth opportunities will be adequately captured with an efficientinfrastructure. The total cash inflow before financing of $4.65 million against$5.26 million last year reflects this increase in capital expenditure. Thetotal cash position including cash and cash equivalents has continued to improvesignificantly to $17.36 million against $14.21 million last year, generating atotal net cash inflow of $3.13 million after the financing of a $2.06 millioninvestment plan and the acquisition of $0.42 million of Treasury Shares to meetfuture stock option exercise requirements. Group cash balances are invested in short-term money-market instrumentsexclusively in the UK. With a substantial proportion of the Group's revenue andprofits earned in US$, the short term money market instruments are mostly inthis currency. Interest receivable decreased in line with the decrease of shortterm investment interest rates, although the second part of the year showed aprogressive tightening of US$ interest rates. Balance Sheet The inventory value has slightly increased 2.9% from $2.76 million last year to$2.84 million this year, but at a much lower pace than the growth of revenue.Trade debtors remained under strict control at $5.15 million against $5.12million last year showing an increase of 0.5%, a much slower rate than theoverall growth of 10.1% of revenues. Other debtors increased from $0.80 millionlast year to $1.42 million this year, with the main other debtor account beingthe $0.28 million to be received by the Company as a result of a legal disputesettlement with one of our US competitors. The final payment was received on 7April 2005. The total debtors account increased from $6.07 million last year to$6.64 million this year. Our total recognised but unutilised deferred tax assetaccount increased from $3.56 million to $6.00 million. Short term creditors increased to $5.22 million against $4.45 million last yearand long term liabilities continued to decrease from $0.28 million last year to$0.15 million this year. Total creditors include an amount of $1.15 million fordividend against $0.97 million last year and have increased from $4.81 millionlast year to $5.37 million this year. The Group's net assets have increased23.0% during the year moving from $27.21 million to $33.47 million. The Group's balance sheet continues to strengthen, and with no long term debtand solid free cash generation, the Group expects that it will be able tofinance its operating costs, together with normal levels of capital expenditureand other commitments including dividends and tax, from its existing resources.The Group may in the future have additional demands for finance and has accessto other sources of liquidity from banks, but the Directors believe that theGroup's strong balance sheet leaves it well placed to fund future investmentplans. Treasury The Group maintains treasury control systems and procedures to monitor foreignexchange, interest rates, liquidity, credit and other financial risks. Liquidassets surplus to the immediate operating requirements of the Group are investedand managed centrally by Group Head Office. Exchange rates Euro and Sterling-denominated transaction exposure arising from normal tradeflows both in respect of external or inter-company trade is not hedged againstUS$ equivalents. The Group's policy is to minimise the exposure of Euro andSterling-operating subsidiaries to transaction risk by matching local currencyincome with local currency costs. For this purpose inter-company tradingtransactions are matched centrally and inter-company payment terms are managedto reduce risk. International Financial Reporting Standards Celsis intends to present its 2005 interim results in accordance withInternational Financial reporting Standards (IFRS). The Group is currentlyconducting its analysis of the effects of IFRS on the presentation of itsresults. The principal issues arising on the transition from UK GAAP to IFRSwhich could have an impact on the presentation of Celsis Financial Informationare: - Segmental analysis - Share-based compensation - Research and Development expenditure - Accounting for own shares - Lease accounting - Deferred taxation Celsis is well positioned to ensure compliance in the required timescale. Financial position Celsis' financial strategy is to maintain a robust financial position throughthe rigorous control of costs and strong financial management of all aspects ofits business. This approach enables Celsis to generate sufficient cash to makethe appropriate investments in its business and also to take advantage ofexternal opportunities as and when these arise. Outlook We are pleased with the many successes of this past year and remain confident ofour future prospects. Our Product Group remains the leader in its sector andthe rate of adoption of its rapid microbial testing systems is accelerating. Wewill continue to expand the depth and breadth of product range utilising ourcurrent ATP and AK enzyme-based testing systems, and we are also spending R&Dresources toward the development of testing systems beyond these moreestablished technologies. As pharmaceutical companies once again increased their spending on analyticalservices, our Laboratory Group rebounded strongly in the first half anddeveloped solidly in the second half. Our Chemical Sciences business unitremains robust and we are taking the necessary steps to fuel sustainablebusiness growth in our Biological Sciences business unit. Our Laboratory Groupis a leader in the analytical services markets in North America, the mostdeveloped market for outsourced analytical services, and we believe that we cansustain good growth in this market. Looking at the Group as a whole, the markets for our products and servicescontinue to expand and we are confident that we can grow our top line revenueswhilst continuing to manage our cost base to deliver consistent profit growth.We continue to utilise a disciplined approach to identify potential new businessopportunities and will focus only on opportunities that ensure long-termshareholder value. We would like to take this opportunity to thank all of our employees for theirmany individual and combined contributions towards making this past year asuccess. We also would like to thank our new and existing shareholders fortheir support and continued confidence in Celsis. Jay LeCoque, Chief Executive Officer Jack Rowell, Non-Executive Chairman 24 May 2005 Unaudited Consolidated Profit and Loss Account for the year ended 31 March 2005 $'000 Unaudited Audited Year Year to 31 March to 31 March Notes 2005 2004Turnover 30,397 27,595Cost of sales (10,361) (9,449) _____ _____ Gross profit 20,036 18,146 Sales & marketing expenses (10,241) (9,692)Administrative expenses (3,531) (3,072)Research & development expenditure (733) (782) _____ _____Total operating expenses (14,505) (13,546) Operating profit 5,531 4,600 Interest receivable & similar income 244 263Interest payable & similar charges (24) (35) _____ _____ Profit on ordinary activities before taxation 5,751 4,828 Taxation 1,898 1,829 _____ _____ Profit for the year 7,649 6,657 Dividends (1,150) (966) _____ _____ Retained profit for the year 6,499 5,691 _____ _____ Earnings per Ordinary ShareBasic earnings per Ordinary Share 2 6.83c 6.04cDiluted earnings per share 2 6.77c 6.00c _____ _____ Statement of Group Total Recognised Gains and Losses for the year ended 31 March 2005 Profit for the financial year 7,649 6,657Currency translation differences on foreign currency net 180 499investments _____ _____Total gains recognised since last annual report 7,829 7,156 _____ _____ Unaudited Consolidated Balance Sheet at 31 March 2005 $'000 Unaudited Audited At 31 March At 31 March Notes 2005 2004Fixed AssetsIntangible assets 1,228 1,314Tangible assets 4,766 4,113 _____ _____ 5,994 5,427Current AssetsStocks 2,844 2,761Debtors : amounts falling due after more than one year 81 152Debtors : amounts falling due within one year 6,556 5,916Deferred tax asset 1 5,999 3,559Cash at bank and in hand 17,363 14,207 _____ _____ 32,843 26,595 Creditors : amounts falling due within one year (5,216) (4,536) _____ _____ Net Current Assets 27,627 22,059 Total Assets less Current Liabilities 33,621 27,486 Creditors : amounts falling due after more than one year (143) (226)Provision for liabilities and charges (10) (51) _____ _____ Net Assets 33,468 27,209 _____ _____Capital and Reserves: Called up share capital 1,611 1,611Share premium account 13,120 23,120Profit and loss account 6 17,255 996*Reserve arising on consolidation 1,482 1,482 _____ _____ Equity shareholders' funds 33,468 27,209 _____ _____ * In accordance with UITF38 the ESOT of $24,000 has been reclassified frominvestment to the profit and loss reserve. Unaudited Cashflow Statement for the year ended 31 March 2005 $'000 Unaudited Audited Year Year to 31 March to 31 March Notes 2005 2004 Net cash inflow from operating activities 3 7,088 6,502 Returns on investments and servicing of financeInterest received 244 263Interest paid (24) (35) _____ _____Net cash inflow from returns on investments 220 228and servicing of financeTaxationCorporation tax paid (592) (149) _____ _____ (592) (149)Capital expenditurePurchase of tangible fixed assets (2,064) (1,333)Sale of tangible fixed assets - 9 _____ _____ Net cash outflow from capital expenditure (2,064) (1,324) Equity dividends paid (966) - _____ _____ Cash inflow before management of liquid resources and financing 4,652 5,257 _____ _____Management of liquid resourcesSale of short-term investments - 4,896 FinancingIssue of shares - 2,513Expenses of shares issued - (72)Proceeds from share options exercised - 24Purchase of treasury shares (420) -Repayment of principal under finance leases (135) (161) _____ _____ Net cash outflow from financing (555) 2,304 _____ _____ Increase in cash in the period 3,130 12,457 _____ _____ Notes for the year ended 31 March 2005 1. Deferred tax asset $'000 Unaudited Audited Year Year to 31 March to 31 March 2005 2004Amounts falling due within one year 2,050 1,500Amounts falling due after more than one year 3,949 2,059 _____ _____ 5,999 3,559 _____ _____ 2. Basic & diluted profit per ordinary share Profit on ordinary activities after taxation 7,649 6,657Basic weighted average number of Ordinary Shares in issue 112,003,962 110,205,337Diluted weighted average number of Ordinary Share in issue 112,904,087 111,000,910 _____ _____ 3. Reconciliation of operating profit to net cash inflow from operatingactivities Operating profit 5,531 4,600Depreciation of tangible fixed assets 1,454 1,212Movement in provision against shares held by ESOT - (13)Amortisation of intangible assets 88 94Loss on disposal of tangible fixed assets - 1(Increase)/decrease in debtors (548) 179(Increase)/decrease in stocks (78) 352Increase in creditors 682 128Costs of fundamental reorganisation provided - provision expended (41) (51) _____ _____Net cash inflow from continuing operating activities 7,088 6,502 _____ _____ 4. Reconciliation of net cash flow to movement in net funds Increase in cash in the period 3,130 12,457Sale of short-term investments - (4,896)Repayment of finance lease and loan obligations 135 161 _____ _____Changes in net funds resulting from cashflows 3,265 7,722Exchange adjustment 30 128 _____ _____ Movement in net funds in the year 3,295 7,850 _____ _____ Net funds at the beginning of the year 13,953 6,103 _____ _____ Funds at the end of the year 17,248 13,953 _____ _____ 5. Analysis of net funds $'000 Audited Unaudited At Foreign At 1 April exchange 31 March 2004 Cashflow differences 2005 Cash at bank and in hand 14,207 3,126 30 17,363Bank overdrafts (4) 4 - -Finance leases (250) 135 - (115) _____ _____ _____ _____ 13,953 3,265 30 17,248 _____ _____ _____ _____ 6. Profit and loss account Year to 31 March 2005At 1 April 2004 996Retained profit for the period 6,499Capital reorganisation 10,000Treasury shares (420)Exchange difference 180 _____ At 31 March 2005 17,255 _____ 7. Preparation of Preliminary Statement The foregoing financial information, which has been prepared on the basis of theaccounting policies set out in Celsis International plc's accounts for the yearto 31 March 2004, does not amount to full accounts within the meaning of section240 of the Companies Act 1985 (as amended). The auditors reported on the statutory accounts for the year ended 31 March2004; their report was unqualified and did not contain a statement under eithersection 237(2) or (3) of the Companies Act 1985. The statutory accounts for theyear ended 31 March 2005 will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. 8. Dividend The Directors have decided to recommend to the Annual General Meeting ofShareholders the declaration of a dividend of 1.02 cents per share. Thedividend will be payable, subject to approval at the Annual General Meeting, on26 August 2005 to shareholders on the register on 30 July 2005. 9. Annual Report and Accounts Copies of the Annual Report and Accounts will be sent to holders of CelsisInternational plc's Ordinary Shares. Copies of this announcement and of theAnnual Report and Accounts will be made available to the public at CelsisInternational plc's offices at Suite 15, Lyndon House, Kings Court, Newmarket,CB8 7SG, UK. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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