10th Sep 2007 07:00
For further information, please contact: Medical Solutions plc Nick Ash Managing Director Tel: 0115 973 9010 www.medical-solutions.co.uk Bishopsgate Communications Ltd Nick Rome/Sophie Davis Tel: 0207 562 3350 www.bishopsgatecommunications.com10 September 2007 Medical Solutions plc ("Medical Solutions" or "the Company" or "the Group") Interim results for the six months ended 30 June 2007
The Board of Medical Solutions plc , the provider of expert, quality services and products to the healthcare, pharma biotech and life sciences research sectors announces its interim results for the six months ended 30 June 2007.
Financial highlights - continuing operations
* 16% improvement in normal administrative expenses, reduced to ‚£1,735,000 (2006: ‚£2,065,000) * 31% improvement in operating loss (before exceptional credit) to ‚£880,000 (2006: ‚£1,270,000 loss) * Exceptional credit of ‚£206,000 achieved * 77% improvement in loss before tax to ‚£304,000 (2006: ‚£1,310,000 loss) * Net cash of ‚£14.1 million (30 June 2006: ‚£2.7 million)
Key events
* Post period end acquisition of Geneservice Limited ("Geneservice"), enhancing the Group's service offering by including genomic technologies, creating a "one-stop shop" for diagnostic and drug development support services. Geneservice traded profitably prior to acquisition, producing a profit before tax of ‚£216,000 for the eleven months to February 2007 * Appointment as exclusive UK distributor for Oncotype DX(tm), a cutting edge breast cancer diagnostic assay, by Genomic Health, Inc. * Geneservice chosen by Applied Biosystems, Inc. to be the UK service provider of its SNPlex(tm) Genotyping System * Acquisition of a 40% equity stake in Number One Health Group Limited ("Number One Health"), providing access to the private healthcare market * Laboratory licensed by the Human Tissue Authority maintained GLP compliance and CPA accreditation
Laurie Turnbull, Chairman of Medical Solutions said:
"The first half of 2007 has been a period of evolution for Medical Solutions, with necessary change creating a stable platform from which to move the business forward. There have been changes to, and strengthening of, the Board and senior management teams and the development, communication and implementation of a clear growth strategy for the Group. In parallel with this, we have continued to focus on the effective management of costs within the business.
"We have made steady progress towards our stated aims of enhancing our portfolio of healthcare services through our investment in Number One Health and our partnership with Genomic Health, Inc. as the exclusive UK distributor for the Oncotype DX(tm) breast cancer diagnostic assay.
"The acquisition of Geneservice was a very important step for us. It was clear to the Board that in order to enhance our service offering, we needed to extend our portfolio to include DNA and RNA based analyses. The acquisition revolutionises our capability in diagnostic and clinical research services and modernises the whole business, bringing in cutting edge technologies and creating a "one-stop shop" for diagnostic services.
"The strategic relationships announced with Genomic Health, Inc., and more recently with Applied Biosystems, Inc., demonstrate that Medical Solutions has the profile, credibility and expertise to be a partner of choice for leading life science companies.
"There remains much to do during the second half of 2007, including the effective integration of Geneservice to fully realise the potential of this acquisition. With the addition of the genomic technologies that the acquisition of Geneservice brings to the Group, we are well placed to continue to develop our business and look forward to further opportunities for growth in the period ahead. I would like to extend a warm welcome to everyone from Geneservice and Number One Health to Medical Solutions as we enter an important phase of growth for the Group."
Chairman's StatementIntroduction
The first half of 2007 has seen Medical Solutions take the first steps in realigning the activities of the business and enhancing our service offering in both our core pathology expertise and our drug development support services.
At the same time as looking to grow the business we have continued to review the cost base of the Group to ensure it is appropriate. We have made further savings in operating expenses and have reduced operating costs (before an exceptional credit) by ‚£0.4 million compared with the same period last year.
The acquisition of Geneservice, which was completed in July, has revolutionised our diagnostic services which now include the latest DNA and RNA based techniques. This represents a significant enhancement of our service offering to both the healthcare and the pharmaceutical and biotechnology sectors and opens up new markets for the Group in the life sciences research sector.
The rapid and effective integration of the Geneservice business, including consolidation onto the Nottingham site, is a key priority for management for the second half of this year and significant progress has already been made.
Financial review
Turnover for the six months ended 30 June 2007 was consistent with that achieved in the first half of 2006 at ‚£3.1 million (2006: ‚£3.2 million). The main driver for this was the pressure on sales volumes in our Diagnostic Pathology business as highlighted below.
Gross margins have also remained consistent although a slight improvement from 39% to 41% was evident in the first half of 2007 compared with the first half of 2006. However it is likely that we could see pressure on gross margins during the second half of 2007 as we seek to grow our sales volumes in Diagnostic Pathology.
The Board has continued to focus on the control of costs in the business and operating expenses have been reduced to ‚£2.1 million (before an exceptional credit of ‚£0.2 million, note 6) for the six months ended 30 June 2007 from ‚£2.5 million during the same period in 2006. These savings have been achieved through a combination of further efforts to improve the efficiency of the operations and the impact of the staff restructuring that was undertaken at the start of the year.
We have utilised ‚£0.6 million of cash in our trading activities in the first half of 2007. In addition, we have invested ‚£0.3 million in the acquisition of a 40% equity stake in Number One Health and have paid ‚£0.2 million of transaction and restructuring expenses resulting from the Dubai disposal. The Group also earned interest of ‚£0.4 million, of which ‚£0.2 million was not received until the second half of the year. Net cash outflow in the six months ended 30 June 2007, including the non-trading items, amounted to ‚£1.1 million (2006: cash outflow ‚£0.7 million). The Group had a net cash balance of ‚£14.1 million as at 30 June 2007 (30 June 2006: ‚£2.7 million; 31 December 2006: ‚£15.2 million).
Operational reviewDiagnostic Pathology
The second half of 2006 and first half of 2007 have been challenging periods for Diagnostic Pathology. Sales in the six months ended 30 June 2007 were ‚£0.8 million compared with ‚£1.3 million during the same period in 2006.
We have identified opportunities to grow this business by expanding the range of diagnostic and theranostic testing services offered by the Group and by entering strategic relationships with healthcare providers, increasing demand for diagnostic testing and reducing volatility in that demand.
We have made significant progress in the first half of this year towards realising these opportunities. We have launched the first of our tailored packages of tests, targeted at breast cancer, aimed at supporting clinicians in their clinical decision making and helping them achieve the best possible outcome for the patient.
In April we announced the acquisition of a 40% stake in the private healthcare provider Number One Health, based in Harley Street. This opens up a new channel for Medical Solutions to market our portfolio of diagnostic tests directly to the public.
In June we announced our exclusive distribution agreement with Genomic Health, Inc. to distribute their Oncotype DX(tm) breast cancer test in the UK and this represents a key strategic relationship for Medical Solutions. The addition of Oncotype DX(tm) to our portfolio significantly strengthens our position as a leading provider of cutting edge diagnostic and prognostic cancer testing in the UK.
During the second half of the year, we are looking to develop this area of our business through investment in new specialist testing services, enhancement of our diagnostic portfolio and an increase in the size of our sales and business development team.
Drug Development Support Services ("DDS")
The increased focus of our sales and marketing activity on the small to medium sized pharmaceutical and biotechnology companies is starting to show some reward and sales have increased 30% to ‚£207,000 in the first half of the year compared with the same period last year (2006: ‚£156,000).
There has been increasing demand from the pharmaceutical and biotechnology sectors for companies that could offer a portfolio of services from classical tissue pathology through to the latest DNA and RNA based techniques including mutation testing and gene expression profiling. In response to this demand, the Board sought to identify and target appropriate investment and acquisition opportunities to bring these genomic technologies in-house and on 3 July 2007 we completed the acquisition of Geneservice (note 7).
Medical Solutions now provides a "one-stop shop" for diagnostic services from tissue analysis to genomic services including gene expression profiling and genotyping. This enables us to offer molecular diagnostic analysis for pre- and early-stage clinical therapeutic development programmes as well as a full suite of pharmacogenomic services.
Clearly there remains much to do, however the sales pipeline is encouraging as is the increasing number of companies engaging Medical Solutions for regulatory study work and the increase in repeat business. The expansion of our service offering to include the genomic expertise and technology platforms acquired with Geneservice, is crucial to the growth of this element of our business.
Cytology
Cytology continues to be a great success story for Medical Solutions. The growth in the business has been strong and we have now completed the roll out programme for the Surepath(tm) liquid based cytology ("LBC") systems, consolidating our 47% share of the LBC market in England and Wales.
Sales in the first half of 2007 were ‚£2.1 million compared with ‚£1.7 million in the first half of 2006 and the segment result improved to ‚£0.5 million (2006: ‚£ 0.3 million) over the same period.
With the roll out programme for LBC systems now complete, sales in Cytology are expected to plateau over the next year as we achieve the anticipated run rate on the installed systems. However, there are exciting new opportunities for the Cytology business.
The key opportunities for continued growth are provided by extending the use of the LBC systems for non-gynaecological applications, the use of ProExC(tm) a molecular diagnostic assay, to assist in the identification of pre-cancerous cervical cells in borderline cases and, the opportunity with the greatest potential, the introduction of automated screening for cervical cancer in the UK.
Medical Solutions has continued to support the Health Technology Assessment ("HTA") trial on automated cervical cancer screening technologies being conducted in Manchester, but because of the importance of automated screening we have invested in co-sponsorship of further trials. During the period an automated screening trial in Wales has been undertaken in conjunction with Cervical Screening Wales. We expect the results of this trial to be published during the second half of this year. The HTA trial is not expected to conclude until late 2008 or early 2009.
Post period events
On 3 July 2007 we were delighted to announce the completion of the acquisition of Geneservice Limited for consideration of ‚£3.86 million. Geneservice is a profitable, expanding company offering genomic products and technology services for applications in life sciences and clinical research and development. The acquisition was in line with the Group's strategy to grow our healthcare and diagnostic business by enhancing our portfolio of products and services to include DNA and RNA based techniques. It also benefits Medical Solutions by providing an expanded service offering and enhanced customer base, higher value quality assured service and a "one-stop shop" for diagnostic services. The integration will also bring cost benefits to the enlarged business including consolidation of operations to Nottingham.
Board
At the start of the year it was essential to create a stable platform for the growth of the business and establish a Board to deliver that growth. Dr Nick Ash was appointed Managing Director on 1 February 2007, from his former position of Chief Financial Officer. On the same date Sir Gareth Roberts retired from the Board on the grounds of ill health.
On 3 July 2007, following the acquisition of Geneservice, the Board was further strengthened by the appointment of Dr Tom Weaver, former Chief Executive Officer of Geneservice, as Commercial Director. We are sure Tom will be a great asset to the Group as we seek to expand our operations.
Prospects
The short term objective remains to return the Group to profitability and cash generation. This will be achieved through a combination of organic growth and prudent, appropriate investment in acquisition opportunities. With the acquisition of Geneservice, investment in Number One Health and launch of our first cancer diagnostic portfolio, we are already making progress towards our stated aims of expanding our healthcare diagnostic portfolio and enhancing our services to include DNA and RNA based technologies.
During the second half of this year we will focus on the speedy and effective integration of the Geneservice business to accelerate the delivery of the financial benefits of that acquisition. We will continue to enhance our portfolio of healthcare testing and further develop our "one-stop shop" offering for diagnostic services to the pharma biotech sector.
The market place for our products and services is challenging, but we are equipping the Group with the breadth and depth of service offering, technology platforms and expertise to deliver controlled growth and value to shareholders.
Laurie TurnbullChairman10 September 2007 Six Six months Year months ended ended ended 30 June 31 30 June 2006 December 2007 (as 2006 restated*) Continuing operations Note ‚£'000 ‚£'000 ‚£'000 Revenue 2 3,120 3,157 6,025 Cost of sales (1,851) (1,921) (3,640) Gross profit 1,269 1,236 2,385 Selling and distribution expenses (353) (341) (609) Administrative expenses: - normal (1,735) (2,065) (3,837) - restructuring costs - - (185) - exceptional credit 6 206 - - Administrative expenses (1,529) (2,065) (4,022) Research and development (61) (100) (167)
Operating loss from continuing operations (674) (1,270) (2,413)
Finance income 386 44 186 Finance costs (12) (84) (105) Share of results of associate (4) - - Loss before tax from continuing (304) (1,310) (2,332)operations Taxation - - - Loss after tax but before profit from (304) (1,310) (2,332)discontinued operations Discontinued operations Profit from discontinued operations - 1,262 946 Loss for the period (304) (48) (1,386) Attributable to: Equity holders of the parent company (304) (69) (1,386) Minority interest - 21 - Loss for the period (304) (48) (1,386) Loss per share attributable to the equity holders of the company
Basic and diluted loss per ordinary share 3 (0.15)p (0.64)p (1.14)p from continuing operations
Basic and diluted total loss per ordinary 3 (0.15)p (0.03)p (0.68)p share
* For details of restatement see note 5.
Attributable to equity holders of the Company Merger Profit Share Share and Translation and loss Minority Total other capital premium reserves reserve reserve interest Equity ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance at 1 4,075 32,284 4,608 117 (24,201) 52 16,935January 2006 Currency - - - (255) - (1) (256)translation adjustments Net income - - - (255) - (1) (256)recognised directly to equity Loss for the - - - - (69) 21 (48)period (as restated note 5) Total recognised - - - - (69) 21 (48)(expense)/income for the period Employee share option scheme: - value of - - - - 83 - 83services provided Minority interest - - - - - (52) (52)settled in cash Balance at 30 4,075 32,284 4,608 (138) (24,187) 20 16,662June 2006 Balance at 1 July 4,075 32,284 4,608 (138) (24,187) 20 16,6622006 Currency - - - (152) - (1) (153)translation adjustments Net income - - - (152) - (1) (153)recognised directly to equity Realisation of - - (2,200) - 2,200 - -merger reserve Loss for the - - - - (1,317) 8 (1,309)period Total recognised - - (2,200) (152) 883 7 (1,462)(expense)/income for the period Employee share option scheme: - value of - - - - (36) - (36)services provided Disposal of - - - 290 - (27) 263overseas subsidiary Balance at 31 4,075 32,284 2,408 - (23,340) - 15,427December 2006 Balance at 1 4,075 32,284 2,408 - (23,340) - 15,427January 2007 Loss for the - - - - (304) - (304)period Total recognised - - - - (304) - (304)income for the period Employee share option scheme: - value of - - - - 15 - 15services provided Balance at 30 4,075 32,284 2,408 - (23,629) - 15,138June 2007 As at As at As at 30 June 30 June 31 2007 2006 December (as 2006 restated) ‚£'000 ‚£'000 ‚£'000 Non-current assets Goodwill 583 14,641 583 Other intangible assets 80 154 117 Investment in associate 144 - - Loan to associate 125 - - Property, plant and equipment 1,411 1,983 1,634 2,343 16,778 2,334 Current assets Inventories 455 726 533 Trade and other receivables 1,608 3,287 1,172 Financial assets - cash and cash equivalents 14,083 2,688 15,229 16,146 6,701 16,934 Current liabilities Trade and other payables 3,064 3,801 3,473 Financial liabilities - borrowings 166 240 162 Provisions - 2,489 - 3,230 6,530 3,635 Net current assets 12,916 171 13,299 Total assets less current liabilities 15,259 16,949 15,633 Non-current liabilities Financial liabilities - borrowings 121 287 206 Net assets 15,138 16,662 15,427 Equity Issued share capital 4,075 4,075 4,075 Share premium 32,284 32,284 32,284 Other reserves 2,408 4,470 2,408 Profit and loss reserve (23,629) (24,187) (23,340) Total equity attributable to equity 15,138 16,642 15,427holders of the parent company Minority interest - 20 - Total equity 15,138 16,662 15,427 Six Six Year months months ended ended ended 31 30 June 30 June December 2007 2006 2006 (as restated) Note ‚£'000 ‚£'000 ‚£'000 Cash flows from operating activities (continuing operations) Cash used in operations 4 (863) (457) (841) Interest paid (12) (23) (45) Net cash used in operating activities (875) (480) (886)(continuing operations) Cash flows from investing activities (continuing operations) Investment in associate (148) - - Loan to associate (125) - - Purchases of property, plant and equipment (64) (141) (255) Purchases of intangible assets - (11) (12) Proceeds from sale of property, plant and - 2 2equipment Proceeds from sale of subsidiary - - 13,963 Transaction costs arising from sale of (53) - (748)subsidiary Cash remaining in disposal group - - (1,623) Interest received 200 44 180 Net cash (used in)/generated from investing (190) (106) 11,507activities (continuing operations) Cash flows from financing activities (continuing operations) Repayment of borrowings (53) (143) (277) Finance lease principal repayments (28) (12) (37) Net cash used in financing activities (81) (155) (314)(continuing operations) Net (decrease)/increase in cash and cash (1,146) (741) 10,307equivalents (continuing operations) Cash flows from operating activities (discontinued operations) Cash generated from operations - 1,233 2,744 Net cash generated from operating activities - 1,233 2,744(discontinued operations) Cash flows from investing activities (discontinued operations) Purchases of property, plant and equipment - (54) (83) Net cash used in investing activities - (54) (83)(discontinued operations) Cash flows from financing activities (discontinued operations) Payment of accrued minority interest - (52) (52) Net cash used in financing activities - (52) (52)(discontinued operations) Net increase in cash and cash equivalents - 1,127 2,609(discontinued operations) Net (decrease)/increase in cash and cash (1,146) 386 12,916equivalents Cash and cash equivalents at beginning of 15,229 2,313 2,313period Exchange losses on cash and cash equivalents - (11) - Cash and cash equivalents at end of period 14,083 2,688 15,229
1. Basis of preparation
These 30 June 2007 consolidated interim financial statements do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. Our auditor, PricewaterhouseCoopers LLP, has issued an unqualified opinion on the Group's IFRS financial statements for the year ended 31 December 2006 and has not included a statement under section 237(2) or (3) of the Companies Act 1985.
These consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They have been prepared in accordance with IFRS and the accounting policies applied are consistent with those applied in the preparation of the Group's consolidated financial statements for the year ended 31 December 2006, except for the adoption of the following amendments which are mandatory for annual periods beginning on or after 1 January 2007:
* Amendment to IAS 1 Capital disclosures. The IASB has issued an amendment to IAS1 requiring new disclosures about entities' management of their capital resources; * IFRS7 Financial instruments: Disclosures. The IASB has issued a new standard on disclosures in respect of financial instruments. This replaces IAS 30 and the disclosure requirements in IAS 32 and locates in one place all disclosures relating to financial instruments. The new requirements incorporate many of the IAS 32's disclosures as well as additional qualitative and quantitative disclosures on the risks arising.
The adoption of these amendments did not affect the Group results or financial position.
2. Segmental analysis
Primary reporting format - operating divisions
At 30 June 2007, the Group is organised into two main operating divisions:
* Pathology Services
* Cytology
Pathology Services comprises the business units of Diagnostic Pathology and Drug Development Support.
During the period there were immaterial sales between business segments (six months ended 30 June 2006: immaterial; year ended 31 December 2006: immaterial) and, where these do occur, are at arm's length pricing.
Unallocated costs represent corporate expenses and common operating costs including property expenses. Segment assets include goodwill, plant and equipment, stocks and debtors. Unallocated assets include leasehold improvements, central debtors and prepayments and operating cash.
Segment liabilities comprise operating liabilities and exclude borrowings.
Capital expenditure represents additions to both tangible fixed assets, comprising additions to plant and equipment, and intangible fixed assets, comprising capitalised development expenditure.
2. Segmental analysis (continued)
Primary reporting format - operating divisions (continued)
Six months ended 30 June 2007 Pathology Services Drug Diagnostic Development Pathology Support Cytology Unallocated Group ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Continuing operations Revenue 830 207 2,083 3,120 Segment result 31 (195) 507 (1,021) (678) Finance costs (12) (12) Finance income 386 386 Loss before tax (304) Taxation - Loss for the period from (304)continuing operations Net loss attributable to equity (304)shareholders Segment assets 1,168 312 1,627 - 3,107 Unallocated assets - property, plant and equipment 567 567 - debtors and prepayments 732 732 - cash and cash equivalents 14,083 14,083 Total assets 1,168 312 1,627 15,382 18,489 Segment liabilities 128 168 854 1,150 Unallocated liabilities - corporate borrowings 160 160 - creditors and accruals 2,041 2,041 Total liabilities 128 168 854 2,201 3,351 Other segment items Capital expenditure - tangible fixed assets - - 57 7 64 Investment in associate 273 - - - 273 Depreciation 20 57 162 48 287 Amortisation of intangible 26 11 - - 37assets Other non-cash expenses - share option scheme 15 15
2. Segmental analysis (continued)
Primary reporting format - operating divisions (continued)
Six months ended 30 June 2006 Pathology Services UK Dubai Drug Diagnostic Diagnostic Development Pathology Pathology Support Cytology Unallocated Group (as restated) ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Continuing operations Revenue 1,289 156 1,712 - 3,157 Segment result 337 (293) 262 (1,576) (1,270) Finance costs (84) (84) Finance income 44 44 Loss before tax (1,310) Taxation - Loss for the year from (1,310)continuing operations Discontinued operations Revenue 3,604 3,604 Segment result 1,262 1,262 Profit before tax 1,262 1,262 Taxation - - Profit for the year from 1,262 1,262discontinued operations Profit attributable to (21) (21)minority interests Net loss attributable to (69)equity shareholders Segment assets 1,114 475 1,750 - 3,339 Unallocated assets - property, plant and 658 658equipment - debtors and prepayments 514 514 - cash and cash 2,261 2,261equivalents - discontinued operations 16,707 16,707 Total assets 1,114 475 1,750 20,140 23,479 Segment liabilities 155 385 809 - 1,349 Unallocated liabilities - corporate borrowings 347 347 - creditors and accruals 1,961 1,961 - discontinued operations 3,160 3,160 Total liabilities 155 385 809 5,468 6,817 Other segment items Capital expenditure - tangible fixed assets 38 88 93 64 283 - intangible fixed assets - 11 - - 11 Depreciation 32 48 142 110 332 Amortisation of 26 11 - - 37intangible assets Other non-cash expenses - share option scheme - - - 83 83
2. Segmental analysis (continued)
Primary reporting format - operating divisions (continued)
Year ended 31 December 2006 Pathology Services UK Dubai Drug Diagnostic Diagnostic Development Pathology Pathology Support Cytology Unallocated Group ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Continuing operations Revenue 2,200 299 3,526 - 6,025 Segment result 529 (516) 658 (3,084) (2,413) Finance costs (105) (105) Finance income 186 186 Loss before tax (3,003) (2,332) Taxation - - Loss for the year from (3,003) (2,332)continuing operations Discontinued operations Revenue 6,004 6,004 Segment result 2,064 2,064 Loss on disposal of (1,089) (1,089)operation Profit before tax 975 975 Taxation - - Profit for the year from 975 975discontinued operations Profit attributable to (29) (29)minority interests Net loss attributable to (1,386)equity shareholders Segment assets 1,021 382 1,655 - 3,058 Unallocated assets - property, plant and 611 611equipment - debtors and prepayments 370 370 - cash and cash 15,229 15,229equivalents Total assets 1,021 382 1,655 16,210 19,268 Segment liabilities 139 303 818 - 1,260 Unallocated liabilities - corporate borrowings 213 213 - creditors and accruals 2,368 2,368 Total liabilities 139 303 818 2,581 3,841 Other segment items Capital expenditure - tangible fixed assets 38 88 185 115 426 - intangible fixed assets - 12 - - 12 Depreciation 54 95 296 203 648 Profit on disposal of - - - 2 2fixed assets Amortisation of 53 23 - - 76intangible assets Other non-cash expenses - share option scheme - - - 47 47
2. Segmental analysis (continued)
Secondary reporting format - geographical segments
The continuing operations are based in the UK, which is the home country of the Parent Company, from where the Group's operations are managed. During the prior period the discontinued operations were based in Dubai, UAE.
The sales analysis in the table below is based on the location of the customer. For the continuing operations, all of the orders are received in the UK and all of the Group's assets are based in the UK.
Six months ended 30 June 2007 and 30 June 2006
Revenue Segment Capital assets expenditure Six Six Six Six Six Six months months months months months months ended ended ended ended ended ended 30 June 30 June 30 June 30 June 30 June 30 June 2007 2006 2007 2006 2007 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Continuing operations UK 3,077 3,133 18,489 6,772 64 240 Middle East & Asia 11 - - - - - Europe (excluding UK) 32 22 - - - - North America - 2 - - - - 3,120 3,157 18,489 6,772 64 240 Discontinued operations Middle East & Asia - 3,604 - 16,707 - 54 - 3,604 - 16,707 - 54 Total 3,120 6,761 18,489 23,479 64 294Year ended 31 December 2006 Revenue Segment Capital assets expenditure Year Year Year ended ended ended 31 31 31 December December December 2006 2006 2006 ‚£'000 ‚£'000 ‚£'000 Continuing operations UK 5,981 19,268 355 Middle East & Asia 21 - - Europe (excluding UK) 21 - - North America 2 - - Total 6,025 19,268 355 Discontinued operations Middle East & Asia 6,004 - 83 6,004 - 83 Total 12,029 19,268 438
2. Segmental analysis (continued)
Analysis of revenue by category
The Group's revenue from continuing operations is analysed as follows:
Six Six Year months months ended ended ended 31 30 June 30 June December 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Revenue from the provision of services 997 1,385 2,392 Revenue from the sales of goods 1,864 1,556 3,185 Revenue from operating lease rentals 259 216 448 Total 3,120 3,157 6,0253. Loss per share
Basic loss per share amounts are calculated by dividing net loss for the period attributable to ordinary equity shareholders of the Parent Company by the weighted average number of shares outstanding during the period. Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary equity shareholders by the weighted average number of ordinary shares outstanding during the period adjusted for the effects of dilutive options.
The calculation of basic and diluted earnings per share for the six months ended 30 June 2007 is based on the loss attributable to ordinary shareholders of ‚£304,000 (six months ended 30 June 2006: loss of ‚£69,000; year ended 31 December 2006: loss of ‚£1,386,000) and on the weighted average number of ordinary shares in issue in each respective period of 203,765,232.
IAS 33 Earnings Per Share requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. Net loss per share in a loss-making company would only be increased by the exercise of share options which were out of the money. Assuming that option holders will not exercise out of the money options, no adjustment has been made to the diluted loss per share for out of the money share options.
4. Cash (used in)/generated from operations
Six months Six Year ended months ended 30 June ended 31 2007 30 June December 2006 2006 (as restated) ‚£'000 ‚£'000 ‚£'000 Loss for the period from operations (304) (48) (1,386) Depreciation of tangible fixed assets 287 307 600 Recognition of grant income (18) (37) (55) Amortisation of capitalised development costs 37 37 76 Share of associate's loss 4 - - Profit on sale of property, plant and equipment - (2) (2) Interest payable 12 84 105 Interest receivable (386) (44) (186) Share-based payments - value of employee 15 83 47service Decrease in inventories 78 57 146 (Increase)/decrease in trade and other (250) 161 522receivables Profit from discontinued operations - (1,262) (946) (Decrease)/increase in creditors (338) 207 238 Cash used in operations (863) (457) (841)
All of the cash used in the six months ended 30 June 2007 was from continuing operations.
Cash used in the six months ended 30 June 2006 from continuing operations was ‚£ 457,000 (discontinued operations: cash generated ‚£1,233,000)
5. Prior year comparatives
Potential over recovery of VAT
Further to the restatement in the 2006 Annual Report and Accounts, the income statement comparatives for the six months ended 30 June 2006 have been restated to incorporate an additional charge of ‚£74,000 relating to a potential liability to Her Majesty's Revenue and Customs ("HMRC") for irrecoverable input VAT. This additional charge represents 50% of the total amount that was charged to the income statement for the full year ended 31 December 2006. The profit and loss reserve at 30 June 2006 has therefore been reduced by ‚£74,000 and creditors at that date have been increased by the same amount.
There is no impact on the cash flow statement, other than the reconciling adjustment for the respective movement in creditors and the charge in the profit and loss account falls under the Unallocated category within the Segmental Analysis (note 2).
The previously reported earnings per share of 0.002p changes to a loss per share of 0.03p as a consequence of the additional charges applied in this restatement of the comparatives for the six months ended 30 June 2006.
6. Administrative expenses - exceptional credit
Further to note 5 above, the total accrual for the potential over-recovery of VAT as at 31 December 2006 was ‚£446,000. During the first half of 2007, agreement was reached with HMRC to settle the liability. As a consequence, the balance of the accrual of ‚£206,000 has been released to the income statement as an exceptional credit in the period.
7. Post period events
On 3 July 2007, Medical Solutions plc completed the acquisition of Geneservice Limited for total consideration of ‚£3.86 million (excluding transaction costs and interest on the deferred consideration). Due to the recent completion of the transaction, the fair values of the significant assets and liabilities assumed are preliminary and pending finalisation of the valuations. At this stage the fair values are as follows:
‚£'000 Property, plant and equipment 206 Cash and cash equivalents 269 Other current assets 549 Borrowings (14) Other current liabilities (311) Fair value of net tangible assets acquired 699 Distribution agreements and internally generated software 47 Goodwill arising on acquisition 3,634 Fair value of net assets acquired 4,380 Initial cash consideration on completion 1,503 Deferred cash consideration and retention 2,352 Interest on deferred consideration 80 Costs of acquisition 445 Total consideration 4,3808. Interim results
Copies of the interim results for the six months ended 30 June 2007 will be sent to all shareholders and will be posted on the Company's website at www.medical-solutions.co.uk. In addition, copies may be obtained from the Company Secretary at Medical Solutions plc, 1 Orchard Place, Nottingham Business Park, Nottingham NG8 6PX.
Introduction
We have been instructed by the Company to review the financial information for the six months ended 30 June 2007 which comprises the consolidated income statement, the consolidated statement of changes in shareholders' equity, the consolidated balance sheet as at 30 June 2007 and the consolidated cash flow statement for the six months then ended and related notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
This interim report has been prepared in accordance with IAS 34 Interim financial reporting.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the UK. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2007.
PricewaterhouseCoopers LLPChartered AccountantsEast Midlands10 September 2007Notes:
(a) The maintenance and integrity of the Medical Solutions plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website.
(b) Legislation in the UK governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.
5Unaudited Consolidated Income StatementFor the six months ended 30 June 2007
Unaudited Consolidated Statement of Changes in Shareholders' Equity As at 30 June 2007
Unaudited Consolidated Balance SheetAs at 30 June 2007Unaudited Consolidated Cashflow StatementFor the six months ended 30 June 2007
Notes to the Consolidated Interim Financial Statements For the six months ended 30 June 2007
Notes to the Consolidated Interim Financial Statements cont¢â‚¬¦ For the six months ended 30 June 2007
Independent Review Report to Medical Solutions plc
MEDICAL SOLUTIONS PLCRelated Shares:
SBS.L