17th Mar 2008 07:01
Tepnel Life Sciences PLC17 March 2008 TEPNEL LIFE SCIENCES PLC Preliminary results for the year ended 31 December 2007 Manchester, UK, 17 March 2008: Tepnel Life Sciences plc (AIM: TED), the international molecular diagnostics and research products and services group, announces preliminary results for the year ended 31 December 2007. 2007 Highlights • Substantial underlying organic growth leading to the first year of significant profitability and operating cash inflows • Revenue increased by 19% to £17.8m (2006: £15.0m) and by 22% on a constant currency basis • Operating profit increased to £1.39m (2006: £0.05m) • Earnings before interest, tax, depreciation and amortization (EBITDA) increased by 192% to £2.01m (2006: £0.69m) • First significant operating cash inflow reported at £1.72m (2006: £0.12m) • Improvement in gross margin to 57% (2006: 54%) • Increase in earnings per share to 0.59p (2006: 0.06p) • Strong sales growth in the Molecular Diagnostics division driven by the LifeMatch range of products • Major investment in the future of the Research Products and Services division with the completion of the new pharmaceutical facility in Livingston, Scotland and newly launched service lines Results Year ended Year endedContinuing operations 31 December 2007 31 December 2006 £'000 £'000 Change Revenue 17,819 14,998 + 19%EBITDA (pre exceptionals) 2,005 687 +192%EBIT (pre exceptionals) 1,390 170 +£1.22mEBIT 1,390 48 +£1.34mProfit after tax 1,368 139 + £1.23mBasic EPS 0.59 pence 0.06 pence + 0.53 penceGross margin 57% 54% + 3% Commenting on Tepnel's full year results, Ben Matzilevich, CEO, said: "2007 has been a breakthrough year for Tepnel resulting in impressive revenuegrowth and the first year of significant profitability. This is the result ofour strategy of establishing leadership positions in niche areas of moleculardiagnostics and research products and services. The major investment the Grouphas made in the new facilities, new service lines and product development hasenabled Tepnel to build an exceptional product and service pipeline. Tepnel iswell positioned for future growth." For further information, please contact: Tepnel Life Sciences plc Capital MS&LBen Matzilevich, CEO Mary Clark or Catie CorcoranMichael Slater, Group Finance Director Tel: +44 20 7307 5330Tel: +44 161 946 2200 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 over 200 employees. Tepnel provides test kits, reagents and services to two highly synergisticmarkets, these being Molecular Diagnostics and Biomedical Research. TheCompany's strategy has been to identify high growth niche opportunities withinthese multi-billion pound markets. Tepnel focuses on these niche operations withinternally developed products, patents, expertise and know-how as well asstrategic acquisitions, to develop a leadership position within these definedmarket segments. CHAIRMAN'S STATEMENT 2007 has been a breakthrough year for Tepnel. The Group has deliveredsignificant profits, sales growth and operating cash inflows. This performancehas, for the first time, allowed Tepnel to make substantial capital investmentin the future of the Company. In particular, the construction of the newfacility in Livingston, Scotland and the launch of the new services for thepharmaceutical outsourcing business has placed the Group in a strong positionfor growth in 2008 and 2009. Operating profits from continuing operations were £1.39m (2006: £0.05m) onrevenue of £17.82m (2006: £15.0m). Revenue growth on a constant currency basiswas 22% (2006: 23%). The performance in 2007 is a direct result of Tepnel'scorporate strategy to build leadership positions in attractive niche markets inthe molecular diagnostics 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. Molecular Diagnostics The Molecular Diagnostics division has demonstrated strong growth with a 39%increase in revenues compared to the prior year. This division focuses on thegrowth markets of transplant diagnostics, foetal distress diagnosis and geneticdisease 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, capturingadditional market share and delivering sales growth of over 55% compared to theprior year. In 2007, Tepnel extended its licence with Luminex for access to thexMAP technology. This, along with continued new product development, leaves theGroup well placed for further growth in this market. Tepnel closed its Transplant Diagnostics Service business towards the end of2007. This had become loss making and this closure allows the TransplantDiagnostics business to focus on sales of its core product lines. The resultsfrom this business have been disclosed as discontinued operations in thefinancial statements. The launch of the QST*R range in 2006 was highly successful resulting insignificant sales in key territories. The DNA-based assay is used for the rapiddetection during pregnancy of common genetic abnormalities, including Downsyndrome, Edwards syndrome and Patau syndrome. During the year the product wassuccessfully evaluated by the National Genetic Research Laboratory whichconcluded QST*R was a high quality, reliable product that is easy to use. Research Products and Services This division provides outsourcing services for the pharmaceutical,biotechnology and healthcare industries, food testing products and services andimmunological reagents. Our client base includes many of the top 20pharmaceutical companies. The Research Products and Services division hasdelivered good sales growth with turnover increasing 4% on 2006. The impact ofthe relocation of the pharmaceutical services business and the completion of theBoehringer Ingelheim contract in 2006 offset the otherwise strong underlyinggrowth. Tepnel has made significant capital investment in its pharmaceutical servicesoutsourcing business in 2007. In July, the Group announced the completion ofPhase I of its 18,000 sq ft laboratories on time and to budget. In the samemonth, the existing businesses based in Edinburgh and Glasgow were relocated andin October 2007 work commenced on Phase II. The second phase, the remaining4,000 sq ft, is being used for Tepnel's new services including genotyping andbiopharmaceutical services. In July 2007, the Group completed the acquisitions of laboratory serviceproviders Wildlife DNA Services and Food DNA Services. Wildlife DNA Services isan established provider of genotyping services, specifically in the area ofwildlife crime investigation and wildlife conservation. The acquisition willaccelerate Tepnel's entry into the clinical genotyping market, broadening itsservice offering to the pharmaceutical industry. Food DNA Services provideshigh quality genetic information for identifying food composition and origin.Both of these businesses have now been relocated and integrated with Tepnel'sexisting operations. Future Prospects Following the strategic reorganisation and integration of the businessesacquired in 2004, the Group has significantly improved its year on yearperformance. Each year since 2004 the Group has grown organically by over 20%culminating in this year's operating profit of £1.39m and operating cash inflowof £1.72m. The Group is focusing its Molecular Diagnostics division into key growthmarkets, principally organ transplant monitoring and foetal distressdiagnostics, and developing products which utilise its technologies for newmarkets, including the blood bank market. The strategic objectives forMolecular Diagnostics include expanding the product lines for pre and posttransplant monitoring assays with the aim of becoming a market leader in thissector. The division is also focusing on developing molecular diagnostics forthe highly mutated multi gene disease states within the ELUCIGENE and QST*Rlines. 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. In particular, the capitalinvestment in the pharmaceutical outsourcing services business, means that it iswell placed for future growth. Current Trading Tepnel has made a good start to the new financial year. The Board is confidentthat the Group will report continued improvements in its performance in 2008. Alec CraigNon-Executive Chairman14 March 2008 Group Income Statementfor the Year Ended 31 December 2007 Note Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000 £'000 £'000 Aggregate revenue 1 18,337 16,156Revenue - discontinued operations (518) (1,158)Revenue - continuing operations 1 17,819 14,998Cost of sales (7,676) (6,879)Gross profit 10,143 8,119Selling and distribution costs (2,813) (2,510)Research and development costs (2,069) (1,775)Administrative expenses - normal (3,871) (3,664) - exceptional 2 - (122)Total administrative expenses (3,871) (3,786)Operating profit - continuing operations 1,390 48Finance income 115 80Finance expense (232) (143)Profit/(loss) before taxation - continuing operations 1,273 (15) Tax credit 95 154Profit for the year - continuing operations 1,368 139 (Loss)/profit for the year - discontinued operations (124) 229Profit for the year 4 1,244 368Operating profit before exceptional items -continuing operations 1,390 170 Basic EPS - continuing operations 3 0.59p 0.06pDiluted EPS - continuing operations 3 0.55p 0.06pBasic EPS - profit for the year 3 0.54p 0.17pDiluted EPS - profit for the year 3 0.50p 0.16p Group Statement of Recognised Income and Expensefor the Year Ended 31 December 2007 Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000Income and expense recognised directly in equity Exchange differences on retranslation of foreign operations 77 (58)Profit for the year 1,244 368Total recognised income and expense for the year 1,321 310 Group Balance Sheetat 31 December 2007 Note 31 December 2007 31 December 2006 £'000 £'000 Non-current assetsProperty, plant and equipment 5,567 2,246Intangible assets 2,047 1,836Deferred tax asset 140 104 7,754 4,186Current assetsInventories 2,586 2,645Trade and other receivables 4,514 3,051Income tax receivable 168 88Cash and short-term deposits 3,499 3,857 10,767 9,641 Total assets 1 18,521 13,827 Current liabilitiesTrade and other payables (8,075) (5,108)Financial liabilities (216) (88)Income tax payable (242) (151) (8,533) (5,347) Non-current liabilitiesFinancial liabilities (1,274) (1,307)Provisions (120) -Total liabilities 1 (9,927) (6,654) Net assets 1 8,594 7,173 Capital and reservesEquity share capital 4 36,878 36,878Foreign exchange reserve 4 19 (58)Retained losses 4 (28,303) (29,647)Total equity 8,594 7,173 Group Cash Flow Statementfor the Year Ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000Operating activitiesProfit after taxation 1,244 368Adjustments to reconcile group profit after tax to net cashinflow from operating activities: Tax credit (95) (154)Net finance costs 117 63Depreciation of property, plant and equipment 606 509Amortisation of intangible fixed assets 12 11Share based payments 100 25Increase in trade and other receivables (1,390) (221)Decrease/(increase) in inventories 95 (547)Increase/(decrease) in trade and other payables 984 (4)Cash generated from operating activities 1,673 50Income tax received 44 73Net cash inflow from operating activities 1,717 123 Investing activitiesInterest received 102 80Government grants received 100 -Purchase of subsidiary undertakings (75) (39)Cash held by subsidiary undertakings on acquisition 48 -Investment in fixed deposit 200 (200)Payments to acquire property, plant and equipment (2,092) (1,013)Payments to acquire intangible assets (6) (5)Net cash outflow from investing activities (1,723) (1,177) Financing activitiesInterest paid (41) (22)Proceeds from issue of share capital - 1,276Repayment of capital element of finance leases (85) (36)New borrowings - 1,234Repayment of borrowings (43) -Net cash (outflow)/inflow from financing activities (169) 2,452 (Decrease)/increase in cash and cash equivalents (175) 1,398Cash and cash equivalents at the beginning of the period 3,657 2,279Effect of exchange rates on cash and cash equivalents 17 (20)Cash and cash equivalents at the end of the period 3,499 3,657 Notes: 1 Business Segments (Primary Reporting Format) The primary segment reporting format is determined to be business segments, asthe Group's risks and rates of return are affected predominantly by differencesin the products and services provided. Secondary segment information isprovided geographically. The Research Products and Services (RPS) segmentprovides products and services for the Biomedical research industry. TheMolecular Diagnostics (MD) segment provides diagnostic testing products andservices. The following tables present revenue, profit and certain assets and liabilityinformation regarding the Group's business segments for the years ended 31December 2007 and 31 December 2006: Continuing operations Discontinued RPS MD Total Operations Total 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000Segment revenue 7,538 10,281 17,819 518 18,337 ResultsSegment result 733 1,967 2,700 (124) 2,576Central costs (1,310) - (1,310)Operating profit/(loss) 1,390 (124) 1,266Net finance costs (117) - (117)Profit/(loss) before taxation 1,273 (124) 1,149Tax credit 95 - 95Profit/(loss) for the year 1,368 (124) 1,244 Continuing operations Discontinued RPS MD Total Operations Total 31 December 31 December 31 December 31 December 31 December 2006 2006 2006 2006 2006 £'000 £'000 £'000 £'000 £'000Segment revenue 7,275 7,723 14,998 1,158 16,156 ResultsSegment result 685 447 1,132 229 1,361Central costs (1,084) - (1,084)Operating profit 48 229 277Net finance costs (63) - (63)(Loss)/profit before taxation (15) 229 214Tax credit 154 - 154Profit for the year 139 229 368 All segment revenue is from external customers RPS MD Total 31 December 2007 31 December 2007 31 December 2007 £'000 £'000 £'000Assets and liabilitiesSegment assets 9,477 5,237 14,714Central assets - cash 3,499 - income and deferred tax assets 308Total assets 18,521 Segment liabilities (4,945) (3,250) (8,195)Central liabilities - financial liabilities (1,490) - income tax liabilities (242)Total liabilities (9,927) Net assets 8,594 RPS MD Total 31 December 2006 31 December 2006 31 December 2006 £'000 £'000 £'000Assets and liabilitiesSegment assets 5,458 4,320 9,778Central assets - cash 3,857 - income and deferred tax assets 192Total assets 13,827 Segment liabilities (2,426) (2,682) (5,108)Central liabilities - financial liabilities (1,395) - income tax liabilities (151)Total liabilities (6,654) Net assets 7,173 Geographical Segments (Secondary Reporting Format) The following table presents revenue, expenditure and certain asset informationregarding the Group's geographical segments for the years ended 31 December 2007and 31 December 2006. Revenue by destination Year ended Year ended 31 December 31 DecemberContinuing operations 2007 2006 £'000 £'000 UK 5,759 4,628Rest of Europe 4,959 4,106US 4,252 3,786Asia 1,715 1,699Rest of World 1,134 779 Total segment revenue 17,819 14,998 Revenue from discontinued operations of £518,000 (2006: £1,158,000) relates tosales made in the United States. 2 Exceptional Items Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000Settlement of unfair dismissal claim - 122 There are no exceptional items in 2007. On 24 May 2006, the Group settled theunfair dismissal claim brought by the former Group Finance Director. The£122,000 charge reflects the settlement made in excess of the provision made in2005. 3 Earnings per share Basic earnings per share amounts are calculated by dividing net profit for theyear attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing net profitsattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares outstanding during the period adjusted for the effectsof dilutive options and warrants. Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000Earnings attributable to ordinary shareholders: - continuing operations 1,368 139 - discontinued operations (124) 229Total 1,244 368 000's 000'sWeighted average number of shares 230,211 222,884Dilutive effect of - options 2,284 1,222- warrants 16,864 227Diluted weighted average number of shares 249,359 224,333 Basic earnings per share - continuing operations 0.59p 0.06pDiluted earnings per share - continuing operations 0.55p 0.06pBasic earnings per share - profit for the year 0.54p 0.17pDiluted earnings per share - profit for the year 0.50p 0.16p The Group has granted additional share options to employees that were notclassified as being dilutive during the period but which may become dilutive inthe future. 4 Statement of changes in equity Equity Share Capital Foreign Exchange Reserve Retained Losses £'000 £'000 £'000At 1 January 2007 36,878 (58) (29,647)Total recognised income and expense - 77 1,244Share-based payments - - 100At 31 December 2007 36,878 19 (28,303) Equity share capital The balance classified as equity share capital includes the total net proceeds(both nominal value and share premium) on issue of the Company's equity sharecapital, comprising 1p ordinary shares. Foreign exchange reserve The foreign exchange reserve is used to record exchange differences arising fromthe translation of the financial statements of foreign subsidiaries. 5 Additional financial information Year ended Year ended 31 December 2007 31 December 2006Continuing operations £'000 £'000Operating profit 1,390 48Exceptional items - 122Depreciation 603 506Amortisation 12 11Pre-exceptional EBITDA 2,005 687 6 Constant currency sales growth 2007 results compared with 2006 at constant 2006 exchange rates Year ended Year ended 31 December 2007 31 December 2006 % changeContinuing operations £'000 £'000Research Products and Services 7,557 7,275 4%Molecular Diagnostics 10,728 7,723 39%Revenue 18,285 14,998 22% Foreign currency The principal exchange rates used in the preparation of the Group accounts wereas follows: Year ended Year ended 31 December 2007 31 December 2006Continuing operationsUS dollar - average 2.00 1.84 - closing 1.99 1.96Euro - average 1.46 1.47 - closing 1.36 1.49 7 Dividends The Directors do not recommend the payment of a dividend. 8 Accounting policies Prior to 2007 the Group prepared its annual financial statements under UK GAAP.For the year ended 31 December 2007 the Group is required to prepare its annualconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS). 2006 has been restated accordingly. Reconciliationsbetween previously reported accounts are included in the June 2007 interimreport along with the Group's IFRS accounting policies. The preliminary results for the year ended 31 December 2007 have been approvedby the Directors. Our auditors have issued an unqualified audit report on theresults for the year ended 31 December 2007 under section 235 of the CompaniesAct 1985. The accounts for the year ended 31 December 2007 will be delivered tothe Registrar of Companies in due course. The financial information set outabove does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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