9th Sep 2010 07:00
SPH.L Sinclair Pharma plc Preliminary results for the year ended 30 June 2010 Restructuring primes business for growth
9th September 2010, Godalming, UK: Sinclair Pharma plc (SPH.L), ("Sinclair" orthe "Company") the international speciality pharma company, today announces itspreliminary results for the year ended 30 June 2010.
FINANCIAL HIGHLIGHTS
* Total revenue of £27.6m (2009: £30.4m) * Gross margin excluding licence income improved to 60.8% from 57.8% * Group consistently profitable in H2 for the first time
* EBITDA loss before exceptional items and non cash licensing of £0.5m (2009:
£1.9m) * Operating loss before exceptional items of £3.7m (2009: £0.3m) * Operating loss after exceptional items of £17.0m (2009: £2.7m) * Loss per share after exceptional items of 13.5p (2009: 3.9p)
OPERATING HIGHLIGHTS
* Implementation of strategic review transforms the Company
* Strengthened executive management team allocated key area responsibilities
* Business now streamlined and highly focused on product commercialisation
* Strengthened sales & marketing capabilities driving revenue and margin growth across group
* Major institutional investments pre and post period creates strong capital
base & reduces debt * Strategic product acquisitions facilitated which accelerates growth potential
* Lucrative post period end licensing deals secured with leading new products
for Athlete's Foot and anti-scar treatments to address global and key European markets * Strong new business pipeline building
Chris Spooner, Sinclair's CEO commented:
"Following widespread management change, Sinclair's prospects have beentransformed by a comprehensive restructuring programme which has produced bothsubstantial cost savings and focused resources on productive assets. Thecompany has already enjoyed a strong improvement in underlying sales growth andmargins, and following a robust start to the new financial year is confident offurther substantial progress.Recapitalisation and the Flammazine/terbinafine spray/Kelo-cote deals have onlybeen possible through strong institutional support. We raised £18.2 millionlast December, while the current fundraising of £19.0 million, secured at an 8%premium, will substantially reduce our debt and remove associated restrictivecovenants.The focus of FY10 was predominantly on restructuring and the integration of theFlammazine franchise. The focus of FY11 is to lay the foundations ofsustainable strong growth primarily through multiple-product/country licensingdeals and pipeline development. To this end, we expect positive news in thecoming months.Sinclair has palpable new energy and confidence, and is a fun and excitingplace to work. Such rapid progress and change in just eight months is in largepart due to the commitment and enthusiasm of our employees, to whom I am verygrateful". - Ends -
For further information please contact:
Sinclair Pharma plc Tel: +44 (0)1483 410 600Chris Spooner, CEO Alan Olby, CFO
Email: [email protected]
Singer Capital Markets Ltd Tel: +44 (0)20 3205 7500Shaun Dobson Claes Sp¥ng Biddicks, Financial Public Relations Tel: +44 (0)20 7448 1000Shane [email protected] Alexandra Shilov
Sinclair's management team will discuss the company's results at a presentation for analysts today at 9.30am which will be held at Biddicks, Mercury House, Triton Court, 14-18 Finsbury Square, London EC2A 1BR. Please contact Shane Dolan at Biddicks for further information on +44 (0)20 7448 1000.
Notes to Editors:
About Sinclair Pharma Plc www.sinclairpharma.com
Sinclair Pharma plc is an international specialty pharmaceutical companyproviding solutions to treat wounds, dermatological and oral diseases throughadvanced surface technology and innovative delivery systems. It has a growingsales and marketing operation that is present in France, Italy, Germany andSpain, and an extensive marketing partner network across selected developed &emerging markets."Safe Harbor" Statement under the US Private Securities Litigation Reform Actof 1995: Some or all of the statements in this document that relate to futureplans, expectations, events, performances and the like are forward-lookingstatements, as defined in the US Private Securities Litigation Reform Act of1995. Actual results of events could differ materially from those described inthe forward-looking statements due to a variety of factors.
CHAIRMAN'S STATEMENT
The last financial year was one of generational change for Sinclair as wefocused aggressively on creating a platform for greater sales and margin growthfrom our existing products; making and financing significant productacquisitions to achieve greater critical mass; eliminating all unproductivecosts; achieving more consistent cash generation from a stronger capital base;and on effecting management and cultural changes to achieve these objectives.
Management and Cultural Change
We are all very grateful to Michael Flynn and Jerry Randall, for bringing theCompany to being a well-known name in the specialty pharmaceuticals sector.However, in order to achieve our ambitious objectives for growth, improvedoperating efficiency and better cash flow generation, the Board decided,coinciding with the intention of Michael Flynn to retire, that a significantcultural change and a new vision was important. Chris Spooner was appointed asCEO having demonstrated to the Board an exceptional vision of what the Companycould achieve.Chris performed an in-depth strategic review of your Company on his arrival andafter receiving the full endorsement of your Board, embarked on an energeticplan for cultural change. There were immediate changes to the executivemanagement team, including the appointment of Simon Youlton, our new ChiefScientific Officer, and a number of personnel changes at all levels. A flattermanagement structure has resulted in faster decision making and significantlyreduced overhead and new information systems have increased operational andfinancial transparency. Every employee is aware of our corporate goals and hasdetailed personal objectives.
Stronger Balance Sheet
The appointment of Chris Spooner attracted the strong interest and backing ofsome of the largest and most respected institutional investors in Europe, whoindicated an enthusiasm for new investment in the Company. We raised new equityof £18.2 million during the year and are currently raising £19.0 million. Thissecond equity issue is at an 8% premium to the share price prior to theannouncement of issue, which is a very encouraging sign of the level of supportfor the new management team. Both issues have been backed and indeedoversubscribed by major institutions.These equity issues have enabled us for the first time to achieve a strongcapital base; permit investment in strong new products; and to focus on drivingsales of our own products instead of working to achieve one-off licensing dealsto supply our working capital needs and fulfil City expectations.
Stronger Operating Performance
An intensive restructuring exercise was successfully completed during the year.We have yet to see a full year effect, but annual savings of £1.5m wereachieved despite 27 new personnel joining in the second half. We have alsosignificantly reduced general and admin costs and diverted these resources intoa big step-up in marketing.There has been a major drive to improve gross margins, resulting in a 3percentage points improvement compared with 2009. We have dramatically reducedthe number of peripheral products and focused resources on our key products. Weare focusing actively on driving purchasing costs down by manufacturing moreproduct at our French plant in Cl©ry, which is operating at record productionlevels and we are negotiating supply contracts with high quality manufacturersin India, initially for our growing emerging markets business.As a result of these initiatives, operations were consistently profitable inthe second half for the first time in the Company's history and we achieved ourexpectations despite spending considerable energy and resources on refocusingand restructuring and without recourse to one-off licensing transactions.
It always takes longer for the effects of restructuring and cultural change to be reflected in sales growth but during the second half we saw underlying growth in sales and the start to 2010/2011 has been particularly encouraging.
Product Acquisitions and Product Development
Your Company has an excellent distribution platform and good productacquisitions can improve critical mass and generate rapid gross margincontribution. During the year we acquired and integrated two of the world'sleading wound care brands, Flammazine and Flammacerium. These under-marketedbut leading products not only added £9 million of annualised sales immediatelybut offer excellent growth opportunities with appropriate marketing support,and some very promising line extensions and new indications.After the year-end we announced that we had acquired an option to license theworldwide rights for a one-shot spray presentation of terbinafine for Athlete'sFoot - the only such presentation currently available, and with a likely firstEuropean launch in H1 2012. We are also delighted to have licensed leadinganti-scar treatment Kelo-cote for key European markets.We have actively reviewed the potential of our in-house technologies. Of note,we remain convinced that Decapinol has significant potential despite thetermination of Orapharma's US rights to the mouth rinse. Indeed, we arecurrently in discussions with a number of parties about taking the productforward. With the help of commercial partners we have commenced severaldelmopinol development programmes and have high expectations for a companionanimal product which is currently in late-stage development.
Licensing
The complete reorganisation and relocation of our Business Development team to Paris has been accompanied by a change in strategy.
We have removed the pressure to enter into license agreements driven primarilyby the need for revenue and cash and are taking a more strategic approach tolicensing partners. Emphasis has been to reduce the complexity and improve theprofitability of existing arrangements by focusing on key products andpartners.In key emerging markets, vigorous efforts have been made to secure long-term,multi-product, multi-country partnerships. Several promising negotiations areongoing and we expect to make announcements during the current financial year.We strongly believe in the potential of this strategy to drive growth in themedium-term.OutlookYour Board is confident that a successful management, cultural and strategicchange has been implemented. Accompanied by widespread restructuring andrefocusing measures, and the introduction of significant new capital, webelieve your Company is in the best position since its IPO to deliver excellentreturns to shareholders.
We look forward to reporting further progress in the year ahead.
Grahame CookChairmanBUSINESS REVIEWCountry OperationsSinclair operates through its own affiliates in France, Italy, Spain andGermany, following the creation of the latter earlier on in the year. For theyear ended 30 June 2010, Country Operations contributed £15.6m (57%) of Grouprevenues.FranceIn December 2009, Patrick Loyer was appointed Operation Director for France.Marketing and regulatory affairs teams have also been strengthened, to developeffective marketing strategies and anticipate increased right-to-marketrequirements over pharma companies.
Sinclair maintained its sustainable strategy to dermatologists which led to Sinclair France achieving its ranking as N°11 company in terms of share of voice (CEGEDIM panel, Q2 2010). During the year, the French Operation also implemented its new strategy of direct sales to pharmacies, increasing its sales force and reinforcing OTC marketing expertise. From January 2010, following the acquisition of Flammazine and Flammacerium, the French Operation has initiated promotion to burns units, through the appointment of a Key Account Manager.
Important investment has been allocated to pre-marketing activities prior tothe anticipated reimbursement of Atopiclair cream and subsequent re-launch, aswell as to the launches of the Dermachronic XL range and Papulex UV and to therapid and successful integration of Flammazine and Flammacerium into thecurrent portfolio.
Sinclair France contributed £10.2m to Group revenues, increased from £9.8m in FY09, aided by the acquisition of Flammazine.
Italy
Sinclair Italy has demonstrated remarkable energy which led to their first profitable year at the operations level thanks to innovative and consistent mix-marketing activities, a dynamic sales force, which now covers the whole country and the transfer of all Italian distributor relationships to the Italian affiliate.
The Italian team launched the Soft line of foams (CeraSoft and ESoft) todermatologists, which amongst other factors contributed to the 22% growth ofSinclair sales in Italy versus previous year. The oral care portfolio in Italyis currently promoted through partners such as Recordati, who were successfulin launching the Aloclair Plus range last year which contributed to a 60%increase in Aloclair sales. As part of the Group's strategic review, the B-Lift& B-Derm ranges have been divested. This year, the Italian Operationcontributed £4.7m to group revenues.2010 saw the preparation ahead of the merger between our two Italian companies.With effect from 1 July 2010, there is just one Sinclair company in Italy, thusreducing administration costs.
Spain
In FY10 Sinclair reshaped its activities in Spain, through the consolidation ofits sales force to dermatologists as well as through obtaining theauthorization to own and market drugs. Despite the challenging economic climatein Spain, total product revenue increased by 70% mainly due to theconsolidation of Flammazine and the growth of Sebclair and Papulex. FY10 alsosaw the successful launch of the Dermachronic XL range.
Germany
Sinclair Pharma Germany was founded in November 2009, to manage the German, Austrian and Swiss markets. Lothar Nau was appointed Country Operation Director to oversee developments in these territories.
After the initial period of establishment and consolidation, the new affiliateassumed responsibility for distribution partners in these territories. Since 1April 2010, Sinclair Germany has held the marketing authorizations forFlammazine in Germany and Austria and has started to market and activelypromote Flammazine in hospitals and burn centres. A new branch has beenestablished in Switzerland to manage Flammazine and develop partnerships.Sinclair Germany contributed £0.5m to group revenues in the period since itsincorporation.International OperationsThe International Operations team has been restructured and relocated to Parisduring the year to facilitate the sharing of best practices. A new `mean andlean' organization was set up with reinforced marketing and regulatory affairsskills. This move has been bolstered by new members in each regional team withan increased focus on supporting partners in marketing, regulatory affairs andlogistics.Following the change in management during the year and strategic review,International Operations is now focused on signing multi-country, multi-productdeals in key, fast-growing, emerging markets. This year, InternationalOperations revenues were £11.9m representing 43% of Group revenues, and nowmostly composed of product sales and royalties, not one-off licensing fees.
MEPIA region (Middle East, Pakistan, India, Africa)
The MEPIA region represented more than 40% of International Operations revenuefor the year. Along with a strong focus on realising our strategy in India, theMEPIA team successfully built on our relationships with key partners such asHikma and through the key launches of Papulex and Effadiane in Algeria andSaudi Arabia. In line with the Group's goal of simplifying our modus operandi,the MEPIA team is currently reducing its number of partners in Algeria andMorocco and integrating Flammazine as the top product in the region in terms ofrevenue contribution.
ERTI region (Europe, Turkey, Greece, Israel)
In May 2010 Dario Opiparo was appointed Regional Business Director for theregion which following the closure of the UK sales force in July 2009 nowincludes the UK business. During the year Atopiclair and Sebclair were launchedin Eastern Europe, and Decapinol and Herpclair in Israel. Sinclair also signeda key multi-product, multi-country deal in Scandinavia with launches ofAtopiclair, Decapinol, Herpclair and Xclair planned for the coming year. Inline with the Group's new strategy, the ERTI region is currently focused onconsolidating its presence in Central and Eastern Europe through multi-countryand multi-product partnerships.
NALA region (North America, Latin America)
Mutual termination of the Decapinol distribution agreement was agreed with Orapharma in the US in November 2009, opening ongoing discussions to find a new distributor to commercialise the rinse. A fruitful partnership with Sunstar Americas for Aloclair led to a 30% increase in sales versus FY09.
Sebclair, Sinclair's treatment for seborrhoeic dermatitis was launched duringthe year in the US by Promius Pharma, the dermatology division of Dr Reddy'sLaboratories Inc., under the brand name Promiseb. In under a year, Promiseb hasbecome one of the leading prescribed products within its class in the US.A world-leading animal health company has maintained its exclusive rights todevelop delmopinol for oral care in companion animals, adding $0.25m in licencefees to revenue for FY10.ASIA region
Sinclair is currently involved in advanced discussions to find a multi-country, multi-product deal to cover key, high-growth Asian markets. An agreement is expected to be signed in FY11.
Manufacturing & Logistics
During 2010 Sinclair's manufacturing has undergone a rigorous streamliningprogramme to ensure the optimisation of the supply chain. As a result of thisongoing process, as well as the integration of Flammazine and Flammacerium,Sinclair manufacturing recorded a very strong performance in FY10. From a totalof more than 15.8 million units produced this year, 4.9 million weremanufactured by the Group's proprietary facility at Cl©ry Saint Andre, France(versus 4.2 million in FY09). Following the new product acquisitions inDecember 2009, 1.7 million units were produced for Flammazine and Flammaceriumduring H2. The total volume produced increased by 44% and SKUs have beenreduced from almost 700 to under 400 with further rationalisation planned forthe coming year. In FY10 the ratio of cost of production versus sales revenuedecreased by 3 percentage points.Further positive results are expected with the transfer of some productionoperations to a manufacturing contractor in India, which will significantlyreduce product costs, since this facility will be used as a platform to supplyfinished products in a first stage to the Far East and low cost emergingmarkets. The supply chain team has been reinforced to rationalize the number ofsuppliers and SKUs, to improve COGs and to leverage production expertise.Further cost reductions will be obtained by focusing on purchasing strategythrough competitive purchasing and tenders, a reduction in the number of thirdparty contractors and the reallocation of production to Cl©ry to improvecapacity utilisation. Other projects include the completion of the artworkstandardisation programme and an improved system for production forecasting.Most of these activities have already been implemented during FY10 and furtherpositive results resulting from these changes are expected in FY11.
Marketing & communications
A consistent and coherent on-line strategy was initiated in H2 with thecreation of a new Sinclair corporate website (www.sinclairpharma.com)presenting the Company's activities, portfolio and investor relationsinformation. Product and country websites are now under construction, as is anextranet dedicated to Sinclair's distribution partner network and presence onsocial networking sites. The new Sinclair graphic chart is now fully deployedfor both the dermatology and oral care portfolios, as well as for acquiredproducts.Finally, Product Champions have been appointed to share expertise and bestpractices across the operations on key brands, and to prepare the launches ofthe Soft line (foams) and of the Dosaderm range (first monodose packaging indermatology and woundcare). Sinclair and its portfolio of products are nowpresented and promoted both coherently and consistently across all markets.
RESEARCH AND DEVELOPMENT
Simon Youlton, CSO, joined Sinclair in January 2010 to lead a restructured R&Dand regulatory team from the Group's corporate offices in the UK. Simonimmediately embarked on a strategic review of the R&D pipeline which resultedin swift decisions, and project attrition in order to release and refocusresources towards:
a) leveraging the key company assets with the largest commercial potential, such as delmopinol and the `Flamma' branded products for burns and woundcare; and
b) identifying and undertaking the first steps in acquiring/licensing new products and near market developments that can not only synergise with Sinclair's existing pharmacy and dermatologists distribution channels but provide products with global reach and significant USPs.
R&D Strategy
Historically Sinclair has benefited from the acquisitions made in France andItaly. This has provided it a fast track route to market through its `Annex II'QA certified facility in Milan to develop and deliver medical devices and aformulation and production expertise (gels, creams and foams) through its ownmanufacturing plant.Sinclair has established and proven its ability to develop and launchdermatology and oral healthcare products in major markets. In the main, theseare medical devices and Sinclair has been credited with being one of the firstto open the medical device route for a fast-track market entry of creams andgels based on `barrier' technology with an ability to ameliorate symptoms ofdisease. The company also has strengths in the cosmeceutical field with suchbrands as Papulex® for acne.
Products such as Atopiclair® have fast become recognised as being highly efficacious and filling a clinical gap that was previously present between the more aggressive Rx treatments and the simple emollient / cosmetic products.
Sinclair aims to continue developing such medical devices where clinical unmetneeds present themselves and this also sits well with our intention to expandour woundcare franchise, where liquid dressings are recognised as being medicaldevices.
Over the last year Sinclair has firmly established its intent to expand the bandwidth of its products from a cosmeceutical/medical device company to a medical device/Rx company with multinational sales of branded and generic drugs with a USP. It is our intention to indentify new products that:
a) have unique USP's and patent protection in terms of presentation, delivery or ingredients.
b) have line extension growth possibilities based on internal compatibility with other proprietary Sinclair ingredients or know-how.
c) come with minimum rights to market in all of Sinclair's European Operational Countries and preferably with Europe/Asia/USA or global rights.
Like most biotechs and small to medium sized life science companies there is aneed to supplement our R&D resources through externalization. We shallcompliment our in-house formulation, pre-clinical development expertise andmarket knowledge through the use of Contract Research Organizations to manageour drug dossier drafting and clinical trial programs and collaborations withAcademic and Clinical opinion leaders to progress projects through proof ofprinciple stages.
Regulatory Affairs and QA
Sinclair has established a platform of very good procedures for QA and NationalPharmacovigilance compliance and has successfully passed a number of audits andinspections from competent authorities and notified bodies during the lastyear.The next financial year will place considerably more burden on the departmentand for this reason we have recently recruited a new Head of Global RegulatoryAffairs. We have also retained the services of new contractors, one of whomwill run a centralized e-database for the company's pharmacovigilance and theother has been recruited to manage and accelerate the completion of theFlammazine and Flammacerium MA transfers and dossier updates that arose fromthe acquisition late last year from Solvay.
Two New Product Acquisitions
A novel presentation of an OTC drug for Athlete's Foot
The first opportunity brings Sinclair a much needed boost in the field ofanti-infectives. There are still relatively few classes of anti-fungal drugs onthe market and of all the recent switches that have occurred from systemic totopical formulations, Lamisil® from Novartis has been the most commerciallysuccessful, and at its peak achieved annual sales in excess of $1 billion.The active pharmaceutical ingredient (API), terbinafine is now genericised andin terms of efficacy is by far the most superior drug class to treat Tineapedis infections. Sinclair has identified a development programme from Medpharmwhich is based on a novel and patented delivery platform (MedSpray) that allowsthe controlled release of the API from a spray on patch over several days. TheONLY other single application treatment for this indication is Lamisil Once®which is a aqueous gel in a tube (Note the Lamisil® spray equivalent requiresdaily applications for 7 days). Lamisil Once® is also not available in the USA.10-15% of adults suffer from athlete's foot in the developed world and ourlicensed OTC preparation would combine the most effective active with the mostuser-friendly delivery system (patent protected).The product has already completed a phase II non-inferiority study and reachedits endpoints. We intend to use this clinical data for European approvals usingan abridged dossier, to be submitted in H1 2011 and expect to launch throughSinclair country operations in 2012.
Sinclair will set up a new trial in the USA against a different comparator and once underway seek a licensing partner for North America.
Kelo-Cote
As announced in early September, Sinclair has licensed the rights to market Kelo-Cote® in France, Italy and Spain under the Sinclair brand and expect to launch the product in early 2011.
Kelo-Cote® is manufactured and marketed by Advanced Bio-Technologies, Inc inthe USA and represents the most advanced derivation of a `liquid' siliconedressing with the added benefit of a patented formulation allowing for atransparent, quick drying product to be applied to the skin. This hasconsiderable application and patient esthetic benefits as most people do notfavour use of silicone sheets taped to visible areas of their skin and make-upcan be applied after application of Kelo-Cote®.The product has shown superiority to other silicone gels on the market, and hasproven efficacy in reduction in redness and itching and flattening of raisedscars (Hypertrophic scars). It is effective as a preventative measure toenhance scar maturation and improve physical appearance and to reduce thesymptoms of established problematic scars. It has a profile that complimentsSinclair's woundcare expansion needs and current market presence. The productis both sold OTC and by prescription. It is reimbursed in the UK and listed inthe BNF. It is both 510K and CE certified.The markets for Kelo-Cote® are burns centres (complimenting Flammacerium),dermatologists and pharmacies and it has potential use in scar management afterelective cosmetic surgery such as breast augmentation. A new Kelo-Cote® Solaire(with sun blocker) product has just been certified in Europe and will beavailable at launch to Sinclair.Sinclair has also secured development rights under the ABT patents and aim touse the technology in Kelo-Cote® line extensions that may well include otherwound healing ingredients and further presentations of a silicone basedproduct.
Internal Development Programmes
Flammacerium and the `Flamma' brand
A French based study which is not sponsored by Sinclair but which nonethelessaddresses potential future applications of Flammacerium is underway. This trialis addressing its use in ischaemic ulcers and in particular as an alternativeto the practice of excision in infected ulcers. Sinclair is to invest in widerregistrations for licences for this highly efficacious product across Europe aswell as updating the dossier and potentially extending the label. It is alreadyused as an unlicensed medicine in the UK where demand from burns centres ishigh.
Sinclair is developing new non-drug based formulations of products for low level domestic burns and sunburn which will be launched under the `Flamma' branding to pharmacies.
Delmopinol
Delmopinol is the key ingredient in our anti-gingivitis portfolio of products(marketed as `Decapinol®') and is the ONLY `biofilm busting molecule' availablefor licensing with a thorough clinical package. Sinclair is now directing itsactivities to proof of concept studies and partnering activities to extend itsuse in woundcare and for coating medical devices such as catheters. Theseapplications have recent Sinclair patent applications based on medical `use'claims. Early indications are that these markets need a molecule to combat themore pathogenic and difficult to remove `biofilm' colonisers and thatdelmopinol may be employed as a single reagent or in combination with anotherantispetic. We have secured development agreements with partners established inthese fields, where broadly each party contributes to the development at theirown cost. The most advanced of these deals is for the use of delmopinol in thecompanion animal oral health market.Peri-implantitis which is a condition caused by dental implant relatedinfections is another `low hanging fruit' to leverage the use of delmopinol.The rise of cosmetic/elective dental implants allied to there being no optionscurrently available to mitigate incidence of microbial infection on the surfaceof the implants has provided Sinclair with a market for delmopinol pre-coatedimplants. The company already has proof of concept that the coating would workand not compromise osseo-integration or healing. It is now the intention toundertake a cross-over clinical study to show efficacy in reducing theincidence of post implantation infection. It is estimated that such a studywould take 15-18 months to complete and would be the basis of a medical devicecertification and data to elicit a license from an implant manufacturer.Chris SpoonerChief Executive OfficerChristophe FoucherChief Operating OfficerFINANCIAL REVIEW
The year ended 30 June 2010 was split into two very different halves, bothoperationally and financially. The first half dominated by the acquisition ofFlammazine, associated fund raising activities and changes in seniormanagement. The second half dominated by the strategic review, integration ofFlammazine and implementation of the new strategy. The financial performancewas also dramatically different in each period as set out below: H1 H2 Revenue £11.0m £16.6m
Gross margin (excl licence revenues) 58% 62%
EBITDA pre exceptionals (£2.4m) £1.9m Revenue
Overall revenue of £27.6m shows a 9% decline from the £30.4m reported for theyear to 30 June 2009. This is due to a significant reduction in licence feeincome of £6.4m as the non cash asset swap deals and one-off rights disposalsfrom 2009 were not repeated. Product revenues and royalties increased by 15% to£26.6m from £23.0m as a result of the Flammazine acquisition which contributed£4.2m to revenues in the six months post acquisition. Sinclair will no longerengage in non cash asset swaps or focus on up front licencing income whenentering into new distribution agreements but will prioritise ongoing productrevenues and aim to maximise gross margins. Licence revenues are therefore notexpected to be a significant contributor to revenues in future.
Country operations
Sinclair's country operations contributed 57% of Group revenue for the year,split as follows: 2010 2009 £m £m France 10.2 9.8 Italy 4.7 3.7 Germany 0.5 - Spain 0.2 0.2 UK - 0.4 15.6 14.1Sinclair France revenues were boosted by £0.8m by the acquisition ofFlammazine. The transfer of the products from Solvay completed in March forFrance resulting in just over three months of revenue contribution for theyear. Underlying sales, excluding the acquired products declined 6.7% over theyear, continuing the decline seen in recent years. This is a result of adecline in sales through wholesalers while the new strategy of direct sellingto pharmacies has shown encouraging signs of increased sales through pharmaciestowards the end of the year and this has started to reduce the rate of declineseen across the French portfolio as a whole.Sinclair Italy performed particularly well in the year with growth across allareas of the portfolio. Aloclair revenues grew by 60% as partner Recordatilaunched the Aloclair Plus range and Aloclair teething gel. Dermatology productsales grew by 23% in constant currency terms, in spite of a 36% decline in thenon core dermacosmetic product range which is being disposed.Sinclair Germany was incorporated in December 2009 in order to manageFlammazine and Flammacerium in Germany, Austria and Switzerland and to providea country operation for Sinclair in Germany. The transfer of Flammazineproducts completed on 1 April and revenues of £0.5m therefore represent justthree months sales for the products.Sinclair's Spanish operation did not benefit from the transfer of Flammazineuntil June 2010 and therefore revenues are unchanged on 2009. The UK salesforce was closed in July 2009 at which time the remaining revenues of £0.4m forthe year were reclassified into International operations.
International operations
Revenue in international operations was unchanged at £11.9m. Product revenuesand royalties increased from £8.8m to £11.0m, boosted by the acquisition ofFlammazine and Flammacerium which contributed £2.7m in revenues tointernational operations. Importantly, product sales and royalties represented93% of revenues, compared with just 74% in 2009. Underlying revenues, ignoringthe impact of product acquisitions and currency fluctuations, declined by 7% inthe year as a result of a reduction of £2.0m in revenues from Atopiclair andSebclair. Both products saw increased revenue in 2009 due to large stockingorders from a distributor in Eastern Europe which were not repeated in 2010 andAtopiclair revenues also included £0.8m in 2009 from Graceway in the USA, priorto their acquisition of the rights in December 2008. This decline was partiallyoffset by growth in revenues from Aloclair (£0.7m) and Decapinol (£0.4m).
Gross profit and margin
Gross profit of £17.2m for the year is reduced from the £20.7m recorded for2009. This however is explained by the £6.4m reduction in licence revenues.Importantly, the Group has increased the gross margin excluding licencerevenues (a key performance indicator) from 57.8% to 60.8% for the full year.This is a result of the focus on manufacturing and supply chain following thestrategy adopted by new management from January 2010; and illustrates thebenefit of increasing production at the Group's in-house manufacturing facilityat Clery, France where spare capacity exists.
Operating expenses
Total operating expenses excluding exceptional items were reduced by £0.1m to £20.9m in the year. Selling, marketing and distribution costs increased from £9.5m to £9.7m as a result of the acquisition of Flammazine and a continuedfocus on sales and marketing activities. Administrative expenses declined from£11.5m to £11.2m, in spite of a £0.8m increase in amortisation charges. Thisreduction reflecting the £1.5m annualised cost savings achieved by the newmanagement team following the group restructuring in early 2010.
Exceptional Items
Exceptional charges of £13.3m (2009: £2.4m) have a significant impact on the income statement and include the following major items:
* Impairment charges of £8.5m against certain product and technology rights.
A re-assessment of the market potential of the technologies acquired through certain non-cash asset swap deals and a strategic review of the Group's R&D activities led to the decision not to continue development of
the underlying technologies. A strategic review of the product portfolio by
management led to the decision to dispose of the dermacosmetic products
acquired in 2008 which are non core to the dermatology portfolio. These are
non cash charges. * Restructuring costs of £2.7m were booked in relation to severance and redundancy packages agreed with former directors, senior management and
other employees who left the Group following the restructuring, and legal
provisions relating to certain contracts.
* Foreign exchange losses of £1.0m (2009: gains of £1.7m) on the translation
of an intra-group loan balance as a result of Sterling's appreciation against the Euro compared to June 2009. This is a non cash charge. * Other exceptional charges of £1.1m include inventory provisions, legal claims and bad debt provisions. Further details are set out in note 3.
Operating Loss
There is an operating loss for the year pre exceptional items of £3.7m (2009: £ 0.3m) and post exceptional items of £17.0m (2009: £2.7m).
Financing Costs
Finance costs of £1.4m are unchanged from 2009. Interest charges of £0.9m(2009: £0.65m) are increased due to the increased level of net debt during theyear, largely arising on the Bracken Facility which was drawn in December 2009to part fund the Flammazine acquisition. Finance costs also include a sharebased payments charge on warrants issued to Bracken, £0.1m, and net foreignexchange losses arising on the translation of Euro denominated debts of £0.1m(2009: £0.3m).Taxation
A tax credit of £0.7m (2009: £0.4m) is recorded for the year as a result of theincrease in deferred tax assets recognised on certain of the Group's losses andin relation to the difference between the book value and tax value of certainintangible assets.
Liquidity & Capital Resources
The Group had cash and cash equivalents of £2.1m at 30 June 2010 (2009: £0.1m)as well as access to un-drawn committed borrowing facilities of €2.6m (£2.1m)(2009: £1.9m). Borrowings of £17.3m (2009: £8.3m) principally include theBracken facility of £11.0m, bank loans of £3.7m (2009: £5.7m) and convertibleloan notes of £2.3m issued in September 2009. Net debt at 30 June 2010 stood at£15.2m (2009: £8.2m).Placing and open offerOn 26 August 2010, the Board announced a fully underwritten placing and openoffer to raise £19m at 28p per share, an 8% premium to the closing share priceon the day before. The net proceeds will be used to fully implement the newstrategy by paying down the remaining debt under the Bracken facility, acquiretwo new products, invest in the development of existing assets (delmopinol andFlammacerium) and invest in regulatory affairs activities.Alan OlbyChief Financial Officer
Unaudited Consolidated Income Statement
For the year ended 30 June 2010
Unaudited Audited 2010 2009 Notes Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total items items items items (note 3) (note 3) £'000 £'000 £'000 £'000 £'000 £'000 Revenue 2 27,628 - 27,628 30,408 - 30,408 Cost of sales (10,434) - (10,434) (9,704) - (9,704) Gross profit 17,194 - 17,194 20,704 - 20,704 Selling, marketing (9,724) - (9,724) (9,535) - (9,535)and distribution costs Administrative 3 (11,177) (13,318) (24,495) (11,477) (2,428) (13,905)expenses Operating loss (3,707) (13,318) (17,025) (308) (2,428) (2,736) Finance income 4 69 - 69 131 - 131 Finance costs 4 (1,397) - (1,397)
(1,173) (260) (1,433)
Loss before taxation (5,035) (13,318) (18,353) (1,350) (2,688) (4,038) Taxation 5 725 - 725 417 - 417 Loss for the year (4,310) (13,318) (17,628)
(933) (2,688) (3,621)
Loss per share 6 (3.3p) (10.2p) (13.5p) (1.0p) (2.9p) (3.9p)(Basic and diluted)
Unaudited Statement of Comprehensive Income
For the year ended 30 June 2010
Unaudited Audited 2010 2009 Pre-exceptional Exceptional Total
Pre-exceptional Exceptional Total items items items items (note 3) (note 3) £'000 £'000 £'000 £'000 £'000 £'000 Loss for the year (4,310) (13,318) (17,628) (933) (2,688) (3,621) Other comprehensive income Currency translation (912) - (912) 2,330 - 2,330differences Total comprehensive (5,222) (13,318) (18,540) 1,397 (2,688) (1,291)income for the year
Unaudited Consolidated Balance Sheet
At 30 June 2010 Unaudited Audited 2010 2009 Note £'000 £'000 Non-current assets Goodwill 7 49,645 51,062 Intangible assets 8 25,144 19,708 Investments - 165 Property, plant and equipment 1,317 1,643 Deferred tax assets 2,004 1,304 Other non-current assets 209 89 Assets held for sale 426 - 78,745 73,971 Current assets Inventories 4,775 3,807 Trade and other receivables 9 9,986 9,764 Current tax receivable 24 48 Cash and cash equivalents 2,071 88 16,856 13,707 Total assets 95,601 87,678 Current liabilities Financial liabilities - borrowings 11 (14,722) (3,733) Trade and other payables 10 (10,575) (9,865) Deferred income (405) (713) Current tax liabilities (7) (163) Provisions (572) (382) (26,281) (14,856) Non-current liabilities Financial liabilities - borrowings 11 (2,553) (4,602) Deferred income (29) (280) Other non-current liabilities (265) (239) Provisions (98) (343) (2,945) (5,464) Total liabilities (29,226) (20,320) Net assets 66,375 67,358 Equity Share capital 1,622 1,033 Share premium account 39,500 23,131 Merger reserve 50,474 50,474 Other reserves 5,616 6,528 Retained deficit (30,837) (13,808) Total shareholders' equity 66,375 67,358
Unaudited Consolidated Statement of Changes in Shareholders' Equity
For the year ended 30 June 2010
Share Share Merger Other Retained Attributable Minority Total capital premium reserve reserves deficit to equity interest equity holders of the parent £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 July 935 21,472 50,474 4,198 (10,760) 66,319 12 66,3312008(audited) Exchange - - - 2,330 - 2,330 - 2,330differences arising on translation of overseas subsidiaries Loss for the year - - - - (3,621) (3,621) - (3,621) Total comprehensive - - - 2,330 (3,621) (1,291) - (1,291)income for the year Share based - - - - 573 573 - 573payments Options and 1 - - - - 1 - 1warrants exercised Share capital 97 1,722 - - - 1,819 - 1,819issued Share issue - (63) - - - (63) - (63)expenses Purchase of - - - - - - (12) (12)minority interests Balance at 30 June 1,033 23,131 50,474 6,528 (13,808) 67,358 - 67,3582009 (audited) Exchange - - - (912) - (912) - (912)differences arising on translation of overseas subsidiaries Loss for the year - - - - (17,628) (17,628) - (17,628) Total comprehensive - - - (912) (17,628) (18,540) - (18,540)income for the year Share based - - - - 549 549 - 549payments Options and 11 19 - - 50 80 - 80warrants exercised Share capital 578 17,900 - - - 18,478 - 18,478issued Share issue - (1,550) - - - (1,550) - (1,550)expenses Balance at 30 June 1,622 39,500 50,474 5,616 (30,837) 66,375 - 66,3752010 (unaudited)
Unaudited Consolidated Cash Flow Statement
For the year ended 30 June 2010
Note Unaudited Audited 2010 2009 £'000 £'000
Cash flows from operating activities Net cash outflow from operations 12 (5,066) (1,225) Interest paid (1,525) (803)
Interest paid on finance leases (12)
(45) Taxation (paid)/received (149) 1,603 Net cash used in operating activities (6,752) (470) Investing activities Interest received 66 456 Purchases of property, plant and equipment (245)
(482)
Proceeds from sale of property, plant and equipment 11
27 Purchase of intangible assets (17,667) (2,005) Payment of contingent consideration re CS Dermatologie -
(237)
Deconsolidation of Portugal subsidiary -
(129)
Acquisition of subsidiary undertaking, net of cash acquired - (400)
Net cash used in investing activities (17,835) (2,770) Financing activities Repayments of obligations under finance leases (65) (219) Proceeds from borrowings 15,593 3,866 Repayments of borrowings (4,591) (3,203) Proceeds from issue of share capital 18,558 1,598 Share issue costs (1,510) (63) Net cash generated from financing activities 27,985 1,979 Net increase/(decrease)in cash, cash equivalents and bank 3,398 (1,261)overdrafts Cash, cash equivalents and bank overdrafts at 1 July (1,597)
(354)
Exchange gains on cash and bank overdrafts 49
18
Cash, cash equivalents and bank overdrafts at end of year 1,850 (1,597)
Cash, cash equivalents and bank overdrafts includes:
Cash and cash equivalents 2,071 88 Bank overdrafts (221) (1,685) Cash, cash equivalents and bank overdrafts 1,850 (1,597)1. Basis of preparation
The preliminary financial information has been prepared in accordance withInternational Financial Reporting Standards (`IFRS') as adopted for use in theEuropean Union. In preparing this financial information management has used theprincipal accounting policies as set out in the Group's annual financialstatements for the year ended 30 June 2009 and which will be used in preparingthe financial statements for the year ended 30 June 2010. There have been nochanges to the accounting policies during the year, except as described below:The following new standards and amendments to standards are mandatory for thefirst time for the financial year ending 30 June 2010 and have been applied bythe Group.
* IAS 1 (revised), `Presentation of financial statements'. The revised
standard prohibits the presentation of items of income and expenses (that
is `non-owner changes in equity') in the statement of changes in equity,
requiring `non-owner' changes in equity' to be presented separately from
owner changes in equity. All `non-owner changes in equity' are required to
be shown in a performance statement.
The Group has elected to present two statements: an income statement and a statement of comprehensive income. The preliminary financial information has been prepared under the revised disclosure requirements.
* IFRS 8, `Operating segments'. IFRS 8 replaces IAS14, `Segment reporting'.
It requires a `management approach' under which segment information is
presented on the same basis as that used for internal reporting purposes.
* IFRS 3 (revised), `Business combinations' and consequential amendments to
IAS 27 `Consolidated and separate financial statements', IAS28,
`Investments in associates' and IAS 31 `Investments in joint ventures',
effective prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting date
beginning on or after 1 July 2009.
The revised standard applies to the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are recorded at fair value at the acquisition date, the contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. All acquisition- related costs should be expensed. The Group has not been party to any business combinations since 1 July 2009.
The preliminary financial information has not been audited and does notconstitute statutory accounts within the meaning of section 434 of theCompanies Act 2006. The financial information for the year ended 30 June 2009has been extracted from the Group's financial statements for the year ended 30June 2009. The auditors' report on the financial statements for the year ended30 June 2009 was unqualified and did not contain statements under eithersection 498 (2) or section 498 (3) of the Companies Act 2006. The financialstatements for the year ended 30 June 2009 have been delivered to the Registrarof Companies.The preliminary financial information has been prepared on the going concernbasis which assumes that the Group has adequate resources to continue inbusiness for the foreseeable future. On 26 August 2010, the company announced afully underwritten placing and open offer to raise £19m (£17.9m net ofexpenses) at 28p per share, an 8% premium to the share price at the time. Partof the proceeds will be used to pay down the remaining debt under the Brackenfacility. On the basis of firm placing commitments from a number of theCompany's institutional and significant shareholders, the directors expect theplacing the open offer to be approved by shareholders.
This announcement was approved by the Board of Sinclair Pharma plc on 8 September 2010.
2. Segmental information
The chief operating decision maker has been identified as the executive management team. This team reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The executive management team considers the business as being organised intotwo distinct operating segments; International Operations and CountryOperations. Research and development, technology licensing income and costs,intellectual property and corporate costs are included under the `other'heading.
The executive management team assesses the performance of the operating segments based on a measure of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).
Unaudited Audited 2010 2009 Business International Country Other Total International Country Other TotalSegments operations operations operations operations £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 11,850 15,623 155 27,628 11,898 14,150 4,360 30,408 Cost of (5,849) (4,585) - (10,434) (4,206) (5,498) - (9,704)goods sold Gross 6,001 11,038 155 17,194 7,692 8,652 4,360 20,704profit EBITDA 4,174 (795) (3,892) (513) 5,269 (2,104) (896) 2,269 Total 31,976 46,382 17,243 95,601 26,616 61,045 17 87,678segment assets
During the period there were £3,064,000 (2009: £828,000) of sales at arms length between segments. The revenue analysis above is stated net of inter-company sales.
A reconciliation of total adjusted EBITDA to total profit before income tax isprovided as follows: Unaudited Audited 2010 2009 £'000 £'000 EBITDA for reportable segments (513) 2,269 Depreciation (335) (493) Amortisation (2,859) (2,084) Exceptional items (13,318) (2,428) Operating (loss)/profit before tax (17,025)
(2,736)
Revenue analysis
An analysis of revenue by category is set out in the table below:
Unaudited Audited 2010 2009 £'000 £'000 Product revenue 25,822 21,999 Royalties 819 985 Licence fees and milestones 987 7,424 27,628 30,408
Non-cash transactions of £Nil are included in Licence fees and milestones and net profit (2009: £4.2m).
3. Exceptional operating items
Exceptional items represent significant items of income and expense which dueto their nature, size or the expected infrequency of the events giving rise tothem, are presented separately on the face of the income statement to give abetter understanding to shareholders of the elements of financial performancein the year, so as to facilitate comparison with prior periods and to betterassess trends in financial performance. Unaudited Audited 2010 2009 £'000 £'000 Foreign exchange (losses)/gains (1,038) 1,671 Restructuring costs (2,737) (1,442) Impairment charges (8,470) - Spiromix claim and impairment charge (175) (898) Inventory provision (772) - Provision for doubtful debts (126)
(1,204)
Aborted acquisition costs - (555) (13,318) (2,428)
Foreign exchange losses of £1,038,000 represent the loss on the translation of an intra-group loan balance (2009: gain of £1,671,000). This is a non-cash item.
Restructuring costs of £2,737,000 (2009: £1,442,000) include: redundancypackages paid to former directors and senior management as part of themanagement team restructuring; and provisions for settlements and legal costsfollowing legal challenges from several employees and contractors whosecontract have been terminated. Costs include £342,000 in respect of share basedpayments that vested on redundancy of certain employees and former directors.Impairment charges of £8,470,000 have been made against certain product andtechnology rights. Disappointing sales of the dermacosmetic products acquiredfrom Syrio and a strategic review of the product portfolio led to the decisionto dispose of these products. Agreement has been reached with one of thecurrent distributors to purchase the assets which have been written down totheir recoverable amount. A re-assessment of the market potential of thetechnologies acquired though certain non-cash asset swap arrangements togetherwith a review of the Group's R&D strategy has led to the decision not tocontinue development of the underlying products, in particular the zinctechnology and silver nanotechnology. These are non-cash charges.An impairment provision of £898,000 in prior year was made against the value ofthe product distribution rights for Spiromix, as a result of manufacturingdelays which have resulted in the product not being available for sale in Italyduring the year. This is a non-cash charge. In the year ended 30 June 2010, aclaim for damages was received from the distributor of the product, as a resultof the manufacturing delays and a provision has therefore been made in respectof this claim.The inventory provision of £772,000 relates to goods impounded by customsauthorities in Saudi Arabia that were returned after 18 months but were nolonger in a saleable condition, and to inventory of the dermacosmetic productsthat will be disposed for less than cost under the agreement to dispose of theproduct rights.A provision of £126,000 (2009: £1,204,000) was made for a doubtful debt duefrom one distributor. Movements on other doubtful debt provisions are includedwithin administrative expenses.
Aborted acquisition costs in the prior year were incurred in relation to an acquisition opportunity pursued in the summer of 2008. The discussions were terminated as a result of the market volatility in the autumn of 2008 by which time costs of £555,000 had been incurred.
4. Finance income and costs Unaudited Audited 2010 2009 £'000 £'000 Finance costs Interest on bank loans and overdrafts (327) (591) Interest on other borrowings (601) (16)
Interest due on finance leases (5)
(45)
Net foreign exchange losses on financing activities (100)
(319)
Share based payments - warrants issued to finance (140)
(86)providers Other finance charges (224) (116) Exceptional finance costs - (260) Finance costs (1,397) (1,433) Finance income Bank interest receivable 7 2
Interest receivable on trade receivables 62
50
Unwinding of discount on non-current asset -
77 Other interest income - 2 Finance income 69 131 Net finance expense (1,328) (1,302)Exceptional finance costs in 2009 relate to professional fees incurredarranging finance facilities that the Directors decided not to enter into asthe terms were unfavourable.5. Taxation Unaudited Audited 2010 2009 £'000 £'000
Research and development tax credits 26
-receivable Overseas tax (78) (96) Deferred overseas tax 777 523 Withholding tax - (10) Tax credit on lossbefore tax 725 4176. Loss per share The basic loss per share has been calculated by dividing the loss for the year,by the weighted average number of shares in existence for the year. Shares heldby the Employees' Share Trust, including shares over which options have beengranted to former Directors and staff, have been excluded from the weightedaverage number of shares for the purposes of calculation of the basic loss pershare.The loss and weighted average number of shares for the purpose of calculatingthe diluted loss per share are identical to those used for the basic loss pershare at 30 June 2010, as the exercise of share options and warrants would havethe effect of reducing the loss per share and therefore is not dilutive. Unaudited Audited 2010 2009 Loss attributable to equity shareholders (£'000) (17,628)
(3,621)
Weighted average number of shares 130,891,546
92,904,290
Diluted weighted average number of shares 130,891,546
92,904,290
Basic and diluted loss per share (pence) (13.5p) (3.9p)7. Goodwill Unaudited Audited 2010 2009 £'000 £'000 Cost At 1 July 53,941 50,989 Additions - 355 Exchange adjustments (1,417) 2,597 At 30 June 52,524 53,941
Accumulated amortisation and
impairment At 1 Julyand 30 June 2,879 2,879 Net book value at yearend 49,645
51,062
Exchange adjustments arise as a result of the impact of the difference in theSterling : Euro exchange rate at the beginning and end of the year on balancesrecorded in Euros.8. Intangible Assets Unaudited Audited 2010 2009 £'000 £'000 Cost At 1 July 25,793 17,779 Additions 17,256 6,743 Disposals (43) (108)
Assets reclassified as held for sale (2,778)
Exchange adjustments (752) 1,379 At 30 June 39,476 25,793 Amortisation and impairment At 1 July 6,085 2,968 Charge for the year 2,859 2,084 Disposals (41) (6) Impairment charge (note 3) 8,111 898
Assets reclassified as held for sale (2,491)
Exchange adjustments (191) 141 At 30 June 14,332 6,085 Net book value at year end 25,144 19,708
Additions in the year primarily relate to the acquisition of Flammazine and Flammacerium from Solvay Pharmaceuticals for €17.5million plus associated acquisition expenses.
Assets reclassified as held for sale relate to the dermacosmetic products acquired from Syrio which have been written down to their recoverable amount, see note 3.
Exchange adjustments arise as a result of the impact of the difference in theSterling : Euro exchange rate at the beginning and end of the year on balancesrecorded in Euros.
9. Trade and other receivables
Unaudited Audited 2010 2009 £'000 £'000 Trade receivables 9,690 8,911 Less provision for impairment of trade receivables (1,541)
(1,389)
Trade receivables net of provision 8,149 7,522 Other receivables 854 1,243
Prepayments and accrued income 983
999 9,986 9,764 10. Trade and other payables Unaudited Audited 2010 2009 £'000 £'000 Trade payables 6,065 5,471
Other taxes and social security costs 713
788 Other payables 999 1,029 Accruals 2,798 2,577 10,575 9,86511. Borrowings Unaudited Audited 2010 2009 £'000 £'000 Bank loans 2,536 4,050 Other borrowings - 492
Obligations under finance leases 17
60 Non-current borrowings 2,553 4,602
Obligations under finance leases 41
66 Bank loans 1,178 1,629 Bank overdrafts 221 1,685 Other borrowings 13,282 353 Current borrowings 14,722 3,733 Total borrowings 17,275 8,335
Borrowings included above are repayable as follows: On demand or within one year 14,722
3,733
Over one and under two years 1,183
2,291
Over two and under five years 1,370 2,311 Total borrowings 17,275 8,335 The £12.0m new debt facility secured in October 2009 is classified under otherborrowings. This is secured on the Group's assets and is contractuallyrepayable over five years in monthly instalments. Part of the facility was usedto refinance an existing bank loan in the UK. Interest is charged at 5.5% and6.5% over LIBOR on different tranches of the facility. On £7.0m of thefacility, contractually no repayments are due within the first year fromdrawdown. Expenses of £403,000 have been offset against the gross liability andare being amortised through finance costs over the life of the facility. Thefull amount has been classified as borrowings due within one year followingagreement between the Company and Bracken in June 2010 to waive the June 2010covenant measurements in order for the Group to pursue its new strategy, inreturn for the facility being repaid in full out of the net proceeds of thePlacing and Open Offer announced in August 2010.The £2.3m one year unsecured convertible loan notes issued in September 2009 isincluded within other borrowings and bears interest at 8%. The convertible loannotes were refinanced by a new £2.3m loan note issued in September 2010. Theloan notes can be converted into ordinary 1p shares in the Company at a priceof 24.7p per share, at the option of the holder on quarter end days, startingon 31 December 2010 through to 31 March 2012, the redemption date. There was nofair value attached to the equity element as at inception.
During the year an additional €1.5m loan was obtained from one of the Group's French banks and other borrowings of £0.6m from certain Directors and Mr C Spooner were converted into equity as described in note 13.
12. Cash flow from operations Unaudited Audited 2010 2009 £'000 £'000 Lossbefore tax (18,353) (4,038) Adjustments for: Finance income (69) (131) Finance costs 1,397 1,433 Share based payments 409 487 Depreciation 335 493
Amortisation of intangible assets 2,859 2,084
Non-cash licence agreements - (5,363) Impairment charges (note 3) 8,470 915
Loss on disposal of property, plant & equipment - 56 Loss on sale or disposal of product rights - 102 Profit on sale or disposal of subsidiary (27) -
company
Increase in provision for doubtful debts 34 1,268 Increase in provisions - net of finance costs 216 465
provision Exchange losses/(gains) 1,062 (2,304) (3,667) (4,533) Changes in working capital Increase in inventories (1,247) (192)
(Increase)/decrease in receivables (625) 4,419 Increase/(decrease) in payables 1,029 (989) (Decrease)/increase in deferred income (556) 70 Net cash outflow from operations (5,066) (1,225)
13. Related party transactions
On 10 December 2009, the following Directors and related parties subscribed for shares under the Placing and Open Offer at 32p per share:
Mr G Cook subscribed for 100,000 shares.
Mr JAP Randall subscribed for 704,614 shares which included full settlement of the £36,000 loan and accrued interest that was owed to him.
Mr J-C Tschudin subscribed for 189,997 shares in full settlement of the €62,500 loan and accrued interest that was owed to him.
Mr C Spooner subscribed for 2,568,140 shares which included full settlement of the £500,000 loan and accrued interest, and £300,000 fees payable under a consultancy agreement.
Mr C Spooner also received a fee of £192,000, paid in cash, arising under hisconsultancy agreement, on completion of the Placing and Open Offer in December2009 and further fees of £180,000 are due and will be settled by the issue ofshares to Mr Spooner as part of the Placing and Open Offer announced on 26August 2010.
On 28 May 2010, a loan of £200,000 plus accrued interest of £19,459 was repaid to Mrs S Flynn, wife of Dr MJ Flynn a former Director of the Company.
vendorRelated Shares:
Sinclair Pharma