25th Aug 2015 07:02
25 August 2015
Source BioScience plc
('Source BioScience' or 'the Group')
HALF YEAR REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2015
Solid business performance delivers improved profitability
Source BioScience plc (LSE: SBS) the international laboratory services and products business publishes its Half Year Report for the six months ended 30 June 2015.
Financial highlights
· Revenue unchanged at £12.8 million (2014: £12.8 million)
· Operating profit (before amortisation of intangibles arising from acquisitions) increasedby 15% to £1.6 million (2014: £1.4 million) on consistent revenue
· EBITDA** increased by 13% to £2.7 million (2014: £2.4 million)
· Profit before tax increased by 39% to £1.2 million (2014: £0.9 million)
· EPS increased by 59% to 0.27p basic (2014: 0.17p basic)
· Cash balance of £3.0 million (31 December 2014: £2.6 million) and net debt of £2.8 million(31 December 2014: £4.3 million) reflecting strong operational cash generation
**EBITDA are earnings before net finance costs, taxation, depreciation, amortisation and other non-cash expenses including share option scheme costs
Operational highlights
· Launch of non-invasive prenatal testing ('NIPT') service
· Continued growth of sexually transmitted infectious disease testing service and engagement with a number of new sexual health screening initiatives and providers
· Rapid, 10-hour DNA sequencing service launched in Atlanta
· Commissioned state of the art serology and blood banking products manufacturing facilities at the Group's Rochdale, UK site, including "Class A" Good Manufacturing Practice clean room capability
· Launch of new website and superior e-commerce solution and eShop, allowing customers ready access to products and services, as well as scientific and technical support applications; underpins comprehensive digital marketing strategy for 2015 and beyond
Post-period events
· Completion of the acquisition of Select Pharma Laboratories Ltd ('Select') on 17 August 2015 for up to £7.3 million in cash; the acquisition will provide the enlarged Group with the expertise and capability to provide stability testing and Quality Control batch testing services that are highly complementary with the Group's existing stability storage services
· Award of our first contract with the European Centre for Disease Control, Stockholm for next generation DNA sequencing, worth up to Euro 1.2 million over three years
· Appointment of Tim Jackson-Smith to the Board as Non-Executive Director
Laurie Turnbull, Chairman of Source BioScience, said: "The first half of the year has been one of solid business performance and continued enhancements to our capability and our portfolio of services and products, as reported previously. Laboratory and manufacturing efficiency initiatives have driven further gross margin improvement, which is reflected in increased EBITDA, profit before tax and EPS.
"The acquisition of Select, completed during August, will bring additional skills and expertise to the Group and drive significant international expansion of our bioanalytical and regulatory services business.
"For the rest of the year our focus remains simple: to drive sales growth through our various platforms and successfully integrate the recently acquired Select business to leverage the evident cross-selling opportunities. Although it is still early days, we are experiencing a positive response to the expanded offering of the Group and we are pleased with the performance to date which is in line with our expectations for the full year."
--- ENDS ---
For further information, please contact:
Source BioScience plcDr Nick AshChief Executive OfficerTel: +44 (0) 115 973 9010Email: [email protected]www.sourcebioscience.com
For investor and media enquiries:
N+1 Singer (Financial Advisor, Sponsor and Broker)Aubrey Powell/James WhiteTel: +44 (0) 207 496 3000www.nplus1singer.com
Cautionary statement
This Business Review contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Source BioScience plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in this Business Review should be construed as a profit forecast.
CHAIRMAN'S STATEMENT
Introduction
Source BioScience has continued its growth and development through the first half of 2015. In the Chairman's Annual General Meeting statement issued on the 11 June 2015, the Company reported that the momentum created during 2014 had continued into 2015 with trading in line with expectations.
Financial and Business Review
The Financial and Business Review describes the performance and activities of the Group. This description has been updated in the period to refer to Laboratory Services and Products, which reflects the broadening revenue base of the Group and the enhancements made to the portfolio of services and products over recent years. The enlarged portfolio has numerous applications for a wide range of customers across a number of industries including the healthcare, life science research and biopharma markets.
Revenue for the six months ended 30 June 2015 remained consistent at £12.8 million (2014: £12.8 million) and the gross margin increased to 49% (2014: 47%). Laboratory Services revenue grew by 9% to £6.8 million (2014: £6.2 million) whilst revenue from Products decreased by 8% to £6.1 million (2014: £6.6 million).
Group divisional operating profit (operating profit before central costs) increased by 13% to £3.9 million (2014: £3.4 million).
The Group's cost base has remained tightly controlled throughout the period. Administrative expenses remained consistent at £3.7 million (2014: £3.7 million), representing 29% of revenue (2014: 29% of revenue).
As a result of the improved divisional profit performance, and the management of the cost base, EBITDA increased by over 13% to £2.7 million (2014: £2.4 million). Profit before tax improved by 39% to £1.2 million (2014: £0.9 million) and EPS increased by 59% to 0.27p basic (2014: 0.17p basic).
The financial position of the Group strengthened, with net assets of £26.3 million (31 December 2014: £25.4 million). The Group's cash balance was £3.0 million at 30 June 2015 (31 December 2014: £2.6 million), borrowings were £5.8 million (31 December 2014: £6.9 million) and net debt £2.8 million (31 December 2014: £4.3 million).
Cash generated from operations was £2.3 million in the period (2014: £1.1 million) and net cash inflow was £0.5 million (2014: £0.9 million outflow) after £1.3 million of financing payments (capital and interest) and £0.6 million of capital expenditure on laboratory facilities including the DNA sequencing facility in Atlanta.
Laboratory Services
Laboratory Services comprises the laboratory and bioanalytical activities of the Group including diagnostic testing for cancer and infectious disease; DNA sequencing and contract research activities; stability and cryostorage in addition to downstream analytical services, including stability testing.
The Laboratory Services division has delivered a strong performance in the period. Revenue was £6.8 million, 9% ahead of the same period last year (2014: £6.2 million), and divisional operating profit increased by 34% to £2.5 million (2014: £1.9 million).
Diagnostics
The Diagnostics business provides expert histopathology (tissue analysis), molecular diagnostics (gene-based analysis) and companion diagnostic testing services to public and private healthcare providers. These services have traditionally been applied to cancer diagnostics but are increasingly being applied to meet additional diagnostic requirements such as non-invasive prenatal testing ('NIPT') and sexually transmitted infection.
Diagnostics has delivered good growth in the period, with laboratory volumes up by over 10% on the same period last year. Continued growth in core diagnostics and companion diagnostics for cancer, coupled with the expansion of the sexually transmitted infection testing, delivered increased volumes over the period.
Services are constantly monitored and reviewed to ensure that it meets existing and anticipated demand from customers. The portfolio has been further enhanced in the period with the launch of the NIPT service. The Source BioScience NIPT service uses cutting-edge DNA sequencing technology to analyse foetal cell-free DNA from maternal blood for chromosomal abnormalities. Whilst invasive procedures such as amniocentesis and chorionic villus sampling carry a potential risk of miscarriage, NIPT is risk-free and can be performed as early as the tenth week of pregnancy. NIPT provides expectant mothers with an additional choice in the prenatal screening process. Combined with ultrasound/serum findings, parents can use the result to decide whether or not to undergo an invasive procedure.
DNA sequencing and life science research
The DNA sequencing and life science research business provides ultra-fast DNA sequencing services delivered by the Group's international network of laboratories and distributors to academic research groups, biotechnology and pharmaceutical companies. Source BioScience's ambition is to become the leading commercial provider of DNA sequencing in Europe and the USA.
The number of DNA samples sequenced for customers continues to increase and the momentum is being sustained by the introduction of new services and the expansion of Source BioScience's laboratory network. During the period, the Company's ultra-fast DNA sequencing service was launched from the Group's facilities in Atlanta, providing customers in the south east of the US with access to DNA sequencing data within ten hours of submitting their samples.
Bioanalytical and regulatory services
The bioanalytical and regulatory services business provides support for drug discovery and drug manufacture, from biomarker discovery and clinical trial services through stability storage and bioanalytical testing to sample archiving under environmentally controlled conditions.
The stability storage activities are delivered from four sites in Rochdale, Tramore, Atlanta and Los Angeles. At these sites, customers in the biopharma and life science research markets are offered stability storage, minus 80 Celsius and ultra-low temperature (liquid nitrogen) storage. In the majority of cases, stability storage contracts with customers are multi-year arrangements typically for periods of three years.
Accreditation by the relevant authorities is essential when providing services into the highly regulated pharmaceutical and contract manufacturing industry. The Group holds Good Laboratory Practice ('GLP'), Good Clinical Practice ('GCP') and Good Manufacturing Practice ('GMP') accreditation from the Medicines and Healthcare products Regulatory Agency ('MHRA') and the UK facilities are licensed by the Human Tissue Authority ('HTA').
The ability to bring the latest tissue and gene-based analysis technologies to stability and cryo-storage customers, and vice versa, enables the Group to perform downstream analyses at single site, accredited facilities. This significantly de-risks sample handling and specimen transport, which is attractive to pharmaceutical customers who may only have very limited and extremely valuable samples and specimens. Opportunities with biopharma customers have already been crystallised, resulting from the enhanced offering of storage in conjunction with bioanalytical laboratory expertise. The recent Select acquisition greatly expands the range of analyses that the Group can offer to its customers.
Products
Products comprises the portfolio of clinical products, including cytology products for cervical cancer screening and serology products for blood and tissue banking, and the portfolio of life science research laboratory reagents, including cDNA clones and other biomolecular tools.
In addition, the Group also designs, manufactures and installs its own range of high quality, standard and bespoke, controlled environment systems that provide climatic conditions specified to customer requirements. Typically, customers are pharmaceutical companies, healthcare products manufacturers and contract research laboratories looking to establish in-house stability and speciality storage capability.
Revenue decreased to £6.1 million (2014: £6.6 million) and divisional operating profit reduced to £1.4 million (2014: £1.6 million). The major reason for the decrease in activity is the anticipated reduction in the number of liquid based cytology tests being undertaken by the NHS Cervical Screening Programme.
Clinical products
The serology operation provides diagnostic products and other clinical reagents, including phosphate buffered saline solutions, to laboratories undertaking blood typing, tissue analysis and organ transplant, including NHS Blood and Transplant. This product portfolio complements the Diagnostics services operations where cross-selling opportunities are apparent.
The commissioning of the state of the art, high throughput serology manufacturing suite, including "Class A" GMP clean room capability, at the Group's Rochdale facility supports the next stage in accelerating the growth of the serology business. The enhanced capability will increase the flexibility, productivity and gross margin of the manufacturing process.
Demand for liquid based cytology products directly correlates with overall compliance levels in the NHS Cervical Screening Programme which, as we have previously observed, peaked in 2009. The Company continues to actively manage the clinical product portfolio to minimise the impact of the anticipated and ongoing change in the dynamics of the screening programme.
Life science research reagents
GenomeCUBE®, the Group's proprietary search engine and bioinformatics tool for the Group's product portfolio, has undergone further developments during the period. These have been aimed at enhancing the customers' buying experience and ensuring that GenomeCUBE® is configured appropriately to support our comprehensive digital marketing strategy for 2015 and beyond.
GenomeCUBE® is a key component of the international growth strategy for the medium to longer term and ultimately all of the Group's products will be available through this platform. In conjunction with the improvements made to the Company's website, e-commerce platform and eShop, the enhancements to GenomeCUBE® will enable the accelerated globalisation of our products, providing distributors and customers, with fast and easy access to the Group's entire product portfolio.
Controlled environment
The design and manufacture of stability storage and controlled environment products is highly complementary with the Group's bioanalytical and regulatory services business, including stability storage and stability testing services.
Customers demand high quality, controlled environment systems that meet the regulatory guidelines for stability storage for pharmaceutical products. The Group provides a range of standard and bespoke systems that can be validated to meet the requirements of the MHRA and US Food and Drug Administration ('FDA') which is critical to regulatory approval of therapeutics and other healthcare products.
Acquisition of Select
On 17 August 2015 Source BioScience completed the acquisition of Select for up to £7.3 million in cash. The principal activities of Select are pharmaceutical testing, including physical and chemical testing, and microbiological analyses for applications in therapeutics and healthcare products. The acquisition provides the Company with the expertise and capability to provide stability testing and downstream analytical services that are highly complementary with the Group's existing clinical trial and stability storage services.
The Board believes that the acquisition of Select creates one of Europe's strongest and most comprehensive businesses for integrated stability storage and stability testing, with expertise encompassing pharmaceutical testing and microbiological analyses. The enlarged Group has the capability to offer an enhanced portfolio of bioanalytical laboratory services from facilities accredited by the MHRA and the FDA.
The Select team brings significant experience and knowledge which will enable the enlarged Group to meet the increasing demand for stability and pharmaceutical batch release testing services, from a broad spectrum of customers and from territories that Source BioScience does not currently address.
People
Source BioScience's people are critical to its success. In addition to ensuring the Group operates the appropriate laboratory facilities and technology platforms, the Board is also mindful to ensure that the Group recruits and retains the highest calibre individuals.
The Board will continue to invest to ensure that the Company has the best people in place, and a skilled and experienced senior management team, to support the planned growth and expansion of the business across all of its activities and its international markets.
Today the Company has announced the appointment of Tim Jackson-Smith to the Board as a Non-Executive Director. Tim is an experienced corporate and commercial lawyer with more than 20 years' experience in legal practice, including ten years as a Partner. In addition, Tim has significant, relevant experience in the plc environment, having served for more than eight years in both executive and non-executive director roles at a number of main market and AIM quoted companies.
The Board, and everyone at Source BioScience, would also like to extend their thanks to Dr Sue Foden who will be retiring as Senior Non-Executive Director at the end of August after twelve years with the Company.
Outlook
The Laboratory Services division has performed strongly during the period. There has been continued growth in Diagnostics and DNA sequencing, along with significant expansion of the Bioanalytical and regulatory services business, especially stability storage. The enhanced portfolio of bioanalytical and pharmaceutical testing that Select brings will accelerate the growth of this business.
Substantial investment in laboratory infrastructure, manufacturing capability and e-commerce systems has been made to support the international growth of the Products businesses. This has included the commissioning of the state of the art, high throughput serology manufacturing suite, including "Class A" GMP clean room capability at the Group's Rochdale facility. This will enable the globalisation of the Products businesses and provide customers and distributors with fast and ready access to the Group's entire portfolio.
The robust momentum and business performance seen in the first half of the year is flowing through to the second half. The Board is confident of the outlook for the full year and expects that each of the activities outlined above will contribute to the continuing progress of the Group during the remainder of 2015 and beyond.
The acquisition of Select fits squarely with the stated objective of continued expansion through targeted acquisitions, which enhance the breadth and depth of our portfolio of services, in conjunction with ongoing organic growth and development of the existing business. The addition of Select to the Source BioScience Group will extend our geographic reach and provide a broader offering of services for existing and prospective customers, backed by increased in-house expertise.
Now that the acquisition process has concluded, the integration of the Select business will proceed quickly with a focus on crystallising the cross-selling and other opportunities evident for the enlarged Group.
Laurie Turnbull
Chairman25 August 2015
Unaudited Condensed Consolidated Statement of Comprehensive IncomeFor the six months ended 30 June 2015
Six monthsended30 June2015 | Six monthsended30 June2014 | Yearended31 December2014 | ||
Note | £'000 | £'000 | £'000 | |
Revenue | 2 | 12,801 | 12,766 | 25,175 |
Cost of sales | (6,508) | (6,705) | (12,931) | |
| Gross profit | 6,293 | 6,061 | 12,244 | |
Selling and distribution expenses | (1,141) | (1,213) | (2,391) | |
Research and development | (84) | (82) | (158) | |
Administrative expenses: | ||||
- normal | (3,459) | (3,363) | (6,455) | |
- amortisation of intangibles arising from acquisitions | (282) | (333) | (614) | |
- non-recurring costs | - | - | (808) | |
Administrative expenses | (3,741) | (3,696) | (7,877) | |
Operating profit | 1,327 | 1,070 | 1,818 | |
Finance income | 7 | 5 | 8 | |
Finance costs | (148) | (222) | (411) | |
Profit on ordinary activities before tax | 1,186 | 853 | 1,415 | |
Taxation | (338) | (320) | (481) | |
Profit attributable to equity holders of the Company | 848 | 533 | 934 | |
Other comprehensive income/(expense) | ||||
Items that are, or may subsequently be, recycled to profit | ||||
or loss: | ||||
- exchange differences on translation of foreign operations | (163) | 25 | 38 | |
Total comprehensive income attributable to equity holders of the Company | 685 | 558 | 972 | |
Earnings per share: | ||||
Basic profit per ordinary share | 3 | 0.27p | 0.17p | 0.30p |
Diluted profit per ordinary share | 3 | 0.26p | 0.17p | 0.29p |
Unaudited Condensed Consolidated Statement of Changes in Shareholders' EquityFor the six months ended 30 June 2015
Attributable to equity holders of the parent company | |||||||
Sharecapital | Sharepremium | Mergerand otherreserves | Specialreserve | Translationreserve | Profitand lossreserve | Totalequity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 1 January 2014 | 6,265 | 7,768 | 2,408 | 10,788 | (2) | (2,825) | 24,402 |
Currency translation adjustments | - | - | - | - | 25 | - | 25 |
Profit for the period | - | - | - | - | - | 533 | 533 |
Total comprehensive (expense)/income for the period | - | - | - | - | (25) | 533 | 558 |
Transactions with owners, recorded directly in equity | |||||||
Employee share options: | |||||||
- value of services provided | - | - | - | - | - | 50 | 50 |
- proceeds from shares issued | 6 | 16 | - | - | - | - | 22 |
Balance at 30 June 2014 | 6,271 | 7,784 | 2,408 | 10,788 | 23 | (2,242) | 25,032 |
Balance at 1 July 2014 | 6,271 | 7,784 | 2,408 | 10,788 | 23 | (2,242) | 25,032 |
Currency translation adjustments | - | - | - | - | 13 | - | 13 |
Profit for the period | - | - | - | - | - | 401 | 401 |
Total comprehensive income for the period | - | - | - | - | 13 | 401 | 414 |
Transactions with owners, recorded directly in equity | |||||||
Employee share options: | |||||||
- value of services provided | - | - | - | - | - | 40 | 40 |
- taxation in respect of share based payments | - | - | - | - | - | (37) | (37) |
Reclassification of special reserve | - | - | - | (10,788) | - | 10,788 | - |
Balance at 31 December 2014 | 6,271 | 7,784 | 2,408 | - | 36 | 8,950 | 25,449 |
Balance at 1 January 2015 | 6,271 | 7,784 | 2,408 | - | 36 | 8,950 | 25,449 |
Currency translation adjustments | - | - | - | - | (163) | - | (163) |
Profit for the period | - | - | - | - | - | 848 | 848 |
Total comprehensive income/(expense) for the period | - | - | - | - | (163) | 848 | 685 |
Transactions with owners, recorded directly in equity | |||||||
Employee share options: | |||||||
- value of services provided | - | - | - | - | - | 140 | 140 |
- proceeds from shares issued | 6 | 7 | - | - | - | - | 13 |
Balance at 30 June 2015 | 6,277 | 7,791 | 2,408 | - | (127) | 9,938 | 26,287 |
Unaudited Condensed Consolidated Statement of Financial PositionAs at 30 June 2015
As at30 June2015 | As at30 June2014 | As at31 December2014 | ||
£'000 | £'000 | £'000 | ||
Non-current assets | ||||
Goodwill | 15,996 | 15,996 | 15,996 | |
Other intangible assets | 1,750 | 2,330 | 2,118 | |
Property, plant and equipment | 10,113 | 10,396 | 10,419 | |
Deferred tax | 716 | 1,471 | - | |
28,575 | 30,193 | 29,587 | ||
Current assets | ||||
Inventories | 1,239 | 1,205 | 1,149 | |
Trade and other receivables | 6,004 | 4,764 | 4,829 | |
Cash and cash equivalents | 3,025 | 3,278 | 2,603 | |
10,268 | 9,247 | 8,581 | ||
Current liabilities | ||||
Trade and other payables | 6,245 | 5,800 | 5,281 | |
Financial liabilities | ||||
- borrowings | 2,141 | 2,260 | 2,199 | |
8,386 | 8,060 | 7,480 | ||
Net current assets | 1,882 | 1,187 | 1,101 | |
Total assets less current liabilities | 30,457 | 31,380 | 30,688 | |
Non-current liabilities | ||||
Deferred income | 528 | 590 | 540 | |
Financial liabilities | ||||
- borrowings | 3,631 | 5,738 | 4,679 | |
- derivative financial instruments | 11 | 20 | 20 | |
4,170 | 6,348 | 5,239 | ||
Net assets | 26,287 | 25,032 | 25,449 | |
Equity | ||||
Issued share capital | 6,277 | 6,271 | 6,271 | |
Share premium | 7,791 | 7,784 | 7,784 | |
Special reserve | - | 10,788 | - | |
Other reserves | 2,281 | 2,431 | 2,444 | |
Profit and loss reserve | 9,938 | (2,242) | 8,950 | |
Total equity | 26,287 | 25,032 | 25,449 |
Unaudited Condensed Consolidated Statement of Cash FlowsFor the six months ended 30 June 2015
Six monthsended30 June2015 | Six monthsended30 June2014 | Yearended31 December2014 | ||
£'000 | £'000 | £'000 | ||
Cash flows from operating activities | ||||
Profit for the period | 848 | 533 | 934 | |
Adjustments for: | ||||
Depreciation of property, plant and equipment | 768 | 774 | 1,497 | |
Amortisation of capitalised development costs | 142 | 125 | 262 | |
Amortisation of intangible assets arising on acquisitions | 282 | 333 | 614 | |
Loss/(profit) on sale of property, plant and equipment | 2 | (8) | 52 | |
Fair value gain on investments | - | (1) | - | |
Finance costs | 148 | 222 | 411 | |
Finance income | (7) | (5) | (8) | |
Taxation | 338 | 320 | 481 | |
Share-based payments - value of employee service | 140 | 50 | 90 | |
Increase in inventories | (90) | (142) | (86) | |
Increase in trade and other receivables | (1,191) | (1) | (50) | |
Increase/(decrease) in trade and other payables | 936 | (1,099) | (1,375) | |
Cash generated from operations | 2,316 | 1,101 | 2,822 | |
Interest paid | (139) | (190) | (352) | |
Tax paid | (36) | (60) | (103) | |
Net cash generated from operating activities | 2,141 | 851 | 2,367 | |
Cash flows from investing activities | ||||
Acquisition of subsidiaries | - | (200) | (200) | |
Purchases of property, plant and equipment | (517) | (487) | (1,331) | |
Proceeds from sale of property, plant and equipment | 1 | 71 | 162 | |
Proceeds from sale of investments | - | 48 | 47 | |
Capitalised development costs | (68) | (60) | (269) | |
Interest received | 7 | 5 | 8 | |
Net cash used in investing activities | (577) | (623) | (1,583) | |
Cash flows from financing activities | ||||
Proceeds from issue of shares | 29 | 22 | 6 | |
Repayment of borrowings | (1,060) | (1,060) | (2,120) | |
Finance lease principal repayments | (64) | (131) | (218) | |
Net cash used in financing activities | (1,095) | (1,169) | (2,332) | |
Net increase/(decrease) in cash and cash equivalents | 469 | (941) | (1,548) | |
Cash and cash equivalents at the beginning of the period | 2,603 | 4,158 | 4,158 | |
Exchange (losses)/gains on cash and cash equivalents | (47) | 61 | (7) | |
Cash and cash equivalents at the end of the period | 3,025 | 3,278 | 2,603 |
Responsibility Statement
We confirm that to the best of our knowledge:
· the condensed consolidated interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and
· the Half Year Report includes a fair review of the information required by:
o DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year). The Board does not consider the principal risks and uncertainties for the remaining six months of the year to be materially different to those described in the Annual Report and Accounts for the year ended 31 December 2014).
o DTR 4.2.8R (disclosure of related party transactions and charges therein)
By order of the Board
Laurie Turnbull Chairman25 August 2015 |
Dr Nick Ash Chief Executive Officer25 August 2015 |
Notes to the Condensed Consolidated Interim Financial StatementsFor the six months ended 30 June 2015
1. Basis of preparation
Source BioScience plc is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of Source BioScience plc as at and for the six months ended 30 June 2015 comprise those of Source BioScience plc and its subsidiaries (together referred to as the 'Group').
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as endorsed and adopted for use in the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2014, which have been prepared in accordance with IFRS adopted by the European Union.
The condensed consolidated interim financial statements do not constitute the Group's statutory financial statements within the meaning of Section 434 of the Companies Act 2006. The Group's most recent statutory financial statements, which comprise the Annual Report and audited financial statements for the year ended 31 December 2014 (from which comparative figures are extracted) were approved by the Board on 28 April 2015 and delivered to the Registrar of Companies. The report of the auditor on those financial statements was unqualified, did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 of the Companies Act 2006.
The consolidated financial statements of the Group as at and for the year ended 31 December 2014 are available on request from the Group's registered office at 1 Orchard Place, Nottingham Business Park, Nottingham NG8 6PX or at www.sourcebioscience.com.
These condensed consolidated interim financial statements have been prepared on the basis of accounting policies consistent with those applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2014 except for the adoption of new standards and interpretations effective as of 1 January 2015 as listed below.
· Annual Improvements 2010-2012 Cycle
· Annual Improvements 2011-2013 Cycle
The adoption of these standards and interpretations has not led to any changes to the Group's accounting policies or had any other material impact on the financial position or performance of the Group. The Group has applied the amendment to IFRS8 Operating Segments and has not provided information on segmental assets and liabilities as these are not reported to the chief operating decision maker. Other amendments to IFRSs effective for the period ending 30 June 2015 have no impact on the Group.
The condensed consolidated interim financial statements for the six months ended 30 June 2015 have neither been audited nor reviewed by the Group's auditor in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board.
The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key source of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2014.
There have been no related party transactions or changes in related party transactions described in the latest Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of this financial year.
The condensed consolidated interim financial statements for the six months ended 30 June 2015 were approved by the Board of Directors on 25 August 2015.
2. Operating segments
Information about reporting segments
For the purposes of management reporting to the chief operating decision maker, the commercial and operational activities of the Group are organised into two segments:
· Laboratory Services
· Products
The reporting segments have been updated in the period to reflect the broadening of the revenue base of the Group and the enhancements to the portfolio of services and products over recent years. The enlarged portfolio has many applications across a number of industries including the healthcare, life science research and biopharma markets. The segmental information provided for the six months ended 30 June 2014 and the year ended 31 December 2014 has been restated to reflect these two segments.
During the period there were immaterial sales between business segments (six months ended 30 June 2014: immaterial; year ended 31 December 2014: immaterial) and where these do occur they are at arm's length pricing.
Unallocated costs represent corporate expenses and common operating costs. Segment assets include intangible assets including goodwill, plant and equipment, stocks and debtors. Unallocated assets include all freehold land and buildings, other receivables and prepayments and cash. Segment liabilities comprise operating liabilities and exclude borrowings. Unallocated liabilities comprise borrowings and trade and other payables. Segment capital expenditure comprises additions to plant and equipment and capitalised development costs.
LaboratoryServices | Products | Unallocated | Group | |
Six months ended 30 June 2015 | £'000 | £'000 | £'000 | £'000 |
Continuing operations | ||||
Revenue | 6,751 | 6,050 | - | 12,801 |
Segment result | 2,530 | 1,356 | (2,559) | 1,327 |
Finance income | 7 | 7 | ||
Finance costs | (148) | (148) | ||
Profit before tax | 2,530 | 1,356 | (2,700) | 1,186 |
Taxation | (338) | (338) | ||
Profit for the period | 2,530 | 1,356 | (3,038) | 848 |
Other segment items | ||||
Capital expenditure | ||||
- property, plant and equipment | 395 | 17 | 105 | 517 |
- development costs | 32 | 36 | - | 68 |
Depreciation | 349 | 223 | 196 | 768 |
Amortisation of intangible assets arising on acquisitions | 156 | 126 | - | 282 |
Amortisation of capitalised development costs | 75 | 67 | - | 142 |
Other non-cash expenses | ||||
- share option scheme | - | - | 140 | 140 |
LaboratoryServices | Products | Unallocated | Group | |
Six months ended 30 June 2014 | £'000 | £'000 | £'000 | £'000 |
Continuing operations | ||||
Revenue | 6,178 | 6,588 | - | 12,766 |
Segment result | 1,882 | 1,551 | (2,363) | 1,070 |
Finance income | 5 | 5 | ||
Finance costs | (222) | (222) | ||
Profit before tax | 1,882 | 1,551 | (2,580) | 853 |
Taxation | (320) | (320) | ||
Profit for the period | 1,882 | 1,551 | (2,900) | 533 |
Other segment items | ||||
Capital expenditure | ||||
- tangible assets | 442 | 10 | 35 | 487 |
- intangible assets | 29 | 31 | - | 60 |
Depreciation | 367 | 231 | 176 | 774 |
Amortisation of intangible assets arising on acquisitions | 197 | 136 | - | 333 |
Amortisation of capitalised development costs | 60 | 65 | - | 125 |
Other non-cash expenses | ||||
- share option scheme | - | - | 50 | 50 |
LaboratoryServices | Products | Unallocated | Group | |
Year ended 31 December 2014 | £'000 | £'000 | £'000 | £'000 |
Continuing operations | ||||
Revenue | 13,300 | 11,875 | - | 25,175 |
Segment result | 4,737 | 2,361 | (5,280) | 1,818 |
Finance income | 8 | 8 | ||
Finance costs | (411) | (411) | ||
Profit before tax | 4,737 | 2,361 | (5,683) | 1,415 |
Taxation | (481) | (481) | ||
Profit for the period | 4,737 | 2,361 | (6,164) | 934 |
Other segment items | ||||
Capital expenditure | ||||
- property, plant and equipment | 952 | 185 | 194 | 1,331 |
- development costs | 142 | 127 | - | 269 |
Depreciation | 734 | 448 | 315 | 1,497 |
Amortisation of intangible assets arising on acquisitions | 351 | 263 | - | 614 |
Amortisation of capitalised development costs | 138 | 124 | - | 262 |
Other non-cash expenses | ||||
- share option scheme | - | - | 90 | 90 |
3. Earnings per share
Basic earnings per share amounts are calculated by dividing the net result for the period attributable to ordinary equity shareholders of the Company by the weighted average number of shares in issue during the period. Diluted earnings per share amounts are calculated by dividing the result for the period 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 each respective period is outlined in the table below:
Six monthsended30 June2015 | Six monthsended30 June2014 | Yearended31 December2014 | |
Earnings (£'000) | 848 | 533 | 934 |
Basic earnings per share | |||
Weighted average number of shares ('000s) | 313,669 | 313,433 | 313,504 |
Earnings per share (pence) | 0.27 | 0.17 | 0.30 |
Diluted earnings per share | |||
Weighted average number of shares ('000s) | 313,669 | 313,433 | 313,504 |
Dilutive options adjustment ('000s) | 6,417 | 7,098 | 6,196 |
Weighted average number of shares adjustedfor dilutive options ('000s) | 320,086 | 320,531 | 319,700 |
Diluted earnings per share (pence) | 0.26 | 0.17 | 0.29 |
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. Assuming that option holders will not exercise out of the money options, no adjustment has been made to the diluted earnings per share for out of the money share options.
4. Acquisition of subsidiary
On 17 August 2015 Source BioScience completed the acquisition of Select for up to £7.3 million in cash. The principal activities of Select are pharmaceutical testing, including physical and chemical testing, and microbiological analyses for applications in therapeutics and healthcare products.
5. Half Year Report
Copies of the Half Year Report for the six months ended 30 June 2015 will be posted on the Group's website at www.sourcebioscience.com
--- ENDS ---
Glossary | |
Antibodies | Proteins that are found in blood or other bodily fluids; they are naturally used by the immune system to identify and neutralise foreign objects, such as bacteria and viruses. Experimentally, antibodies are also used as highly specific probes for detecting proteins of interest in tissues. A wide range of antibodies with a large variety of cellular targets is available to research scientists through distributors such as Source BioScience. |
BRAF | The BRAF gene encodes a signalling protein. Mutations of the BRAF gene are quite common in melanoma and colorectal cancer. In colorectal cancer, such mutations make a tumour resistant to inhibitors of the EGFR signalling pathway. |
Batch release testing | GMP conformance testing of each batch of a finished marketed product, against an approved product specification. |
Bioinformatics | The application of information technology, and computer science, to the field of molecular biology. Common activities in bioinformatics include mapping and analysing DNA and protein sequences, aligning different DNA sequences to compare them and handling and analysing huge data sets generated by the latest genomic technologies. |
Biomarkers | Biomarkers often refer to substances found in blood, urine or tissue, changes in which may be used to indicate presence of disease or response to treatment. More generally the term biomarker refers to any molecule that can be used to monitor a particular cellular process and may be a protein, DNA or RNA molecule. |
Bio-repository | A biological materials repository that collects, processes, stores and distributes bio-specimens to support future scientific investigation. |
Blood Bank | A cache or bank of blood components, gathered as a result of blood donation or collection, stored and preserved for later use. |
Blood group serology reagents | A group of reagents which are used to test for the presence or absence of antigens in the blood and determine the blood group. |
Capillary Electrophoresis DNA Sequencing(also known as Sanger sequencing or conventional sequencing) | DNA sequences are determined using a chemical reaction that results in an array of products that terminate in a different fluorescent coloured dye, which vary in size by one nucleotide. The products are separated, like the rungs of a ladder, by passing them through a capillary with an electric current and determining the order in which they emerge. This method remains the best way of inexpensively analysing large numbers of small sets of samples (see also Next Generation DNA Sequencing below). |
Care Quality Commission ('CQC') | As a provider of healthcare laboratory and pathology services to the NHS, which is a regulated activity under the Health and Social Care Act 2008, we are required to be registered with the CQC, a government body established to regulate and inspect health and social care services in England, and ensure organisations maintain good standards and follow appropriate procedures. |
Chromatography | A process in which a chemical mixture carried by a liquid (for example in high performance liquid chromatography / HPLC) or a gas is separated into components as a result of differential distribution of the solutes as they flow around or over a stationary liquid or solid phase. |
Circulating Tumour Cells ('CTC') | The identification of small numbers of cancer cells circulating in the blood has been shown to be of potential prognostic significance in breast cancer, colorectal or prostate cancer, and useful for monitoring response to drug therapy. |
Clinical Pathology Accreditation('CPA') | CPA is the accreditation body for clinical pathology services in the UK. Accreditation involves audit of the ability of a laboratory to provide a service of high and consistent quality by declaring a defined standard of practice, which is performed by the CPA accreditation body. |
Clone | A section of DNA sequence, such as a gene, that is isolated from an organism and can be endlessly replicated by genetic engineering techniques. |
Clone libraries | A clone library is a collection of clones containing complementary DNA ('cDNA') (see below) and is often intended to represent the genes that are expressed within a given cell or tissue type at a given period. |
Companion Diagnostic | A test based on a biomarker (which might be a protein, DNA or RNA molecule), the presence or absence of which is associated with the likely efficacy of a drug or other treatment. Companion diagnostics are useful in stratifying patients into groups which are known to respond in a particular way to a drug. A good example of such a test from the Source BioScience breast cancer portfolio is the HER2 test, which assesses levels of the HER2 protein, expression of which is correlated with response to Herceptin™. |
Cryobank | A bank of cells or whole tissues which are stored at sub-zero temperatures to reduce the amount of chemical reactivity in order to preserve them. At Source BioScience the cryobank operates at minus 196 Celsius using liquid nitrogen storage facilities. |
CYP2D6 | Breast cancer patients with certain genetic variations in the CYP2D6 gene may be slow metabolisers of the drug tamoxifen to its active metabolite endoxifen. In this case changes to the treatment regime may be indicated because the efficacy of the drug is reduced. |
Deoxyribo Nucleic Acid (DNA) and complementary DNA (cDNA) | DNA is a large, complex molecule which, by virtue of a unique sequence of building blocks, contains all the genetic information required to create a cell or organism. cDNA can be made from all the genes in a genome, from a single gene, or from part of a gene. cDNA is DNA that has been synthesised artificially using an RNA template (see below) from the gene(s) selected. |
Dissolution testing
| A process routinely used to provide critical in vitro drug release information for both quality control purposes, for example to assess batch-to-batch consistency of tablets; and drug development for example to predict in vivo drug release profiles. |
Duty of Care Review | An audit of a specific pathologist's practice. Pathology departments have a duty of care to patients whose treatment or clinical management may need to be changed in the light of revised opinions arising from a review of a pathologist's or team's work. Where good practice is suspected to have broken down it may be necessary to arrange a systematic review of cases to fulfil a department's duty of care to their patients. Source BioScience offers a full duty of care review service to pathology departments that need specialist second opinion in these circumstances. |
EGFR mutation testing | Human EGFR is a cellular transmembrane receptor found on the surface of cells. Clinicians wishing to prescribe gefitinib (Iressa™) for lung cancer patients are required to confirm the presence of a number of mutations found in the tyrosine kinase domain on the EGFR gene. |
US Food and Drug Administration ('FDA') | The FDA is an agency of the US Department of Health and Human Services and is responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, cosmetics and items that emit radiation. |
Fluorescence in situ Hybridisation('FISH') | In situ hybridisation ('ISH') is a powerful technique, not unlike immunohistochemistry (below), for visualising the presence of specific sequences of DNA or RNA in cells. The technique uses short synthetic sequences of DNA or RNA which will bind, or hybridise, to the tissue with high specificity for the DNA or RNA of interest within the issue. Fluorescent 'tags' are attached to these synthetic sequences, allowing them to be visualised with a special microscope, even when present at very low levels (FISH). |
FocalPoint™ | An automated imaging system for screening SurePath™ liquid based cytology slides. Using complex algorithms it interprets the images of each slide using the same morphologic features used during screening with the human eye. It can archive up to 25% of cases as requiring "no further review" ('NFR') which then do not need to be manually primary screened. |
GenomeCUBE® | Source BioScience's proprietary database, search engine and e-commerce tool for Life Science products. GenomeCUBE® contains over 20 million clones and over 100,000 antibodies all of which contain downloadable annotation. GenomeCUBE® is available in foreign language and foreign currency versions. |
Genomics | The study of an organism's genome, where the genome of an organism is its whole hereditary information and is encoded in the DNA (see above) and RNA (see below). This includes both the genes and the non-coding sequences of the DNA. |
Genomic products and reagents | In this instance, DNA or RNA extracted and purified from a range of species and provided in a variety of forms for research purposes. |
Genotyping and sequencing | DNA sequencing is the process of precisely determining the order of the building blocks, or nucleotides, of an organism's DNA. The method can be used to determine short sequences of DNA or, in larger experiments, to sequence the entire genome of an organism. Genotyping, in turn, is the process whereby DNA is characterised and then compared to reference data or, if large numbers of samples are genotyped, the data can be examined for patterns which might lead to discoveries of the fundamental causes of inherited diseases. Genotyping is commonly performed by PCR (below) or DNA sequencing. |
Good Clinical Practice ('GCP') | GCP is an international ethical and scientific quality standard for designing, conducting, recording and reporting clinical trials that involve the participation of human subjects. Compliance with this standard provides public assurance that the rights, safety and well-being of trial subjects are protected, consistent with principles that have their origin in the Declaration of Helsinki. Compliance with the principles of GCP is assured via monitoring by the MHRA. |
Good Laboratory Practice ('GLP') | GLP is a set of principles that provides a framework within which laboratory studies are planned, performed, monitored, recorded, reported and archived. These studies are undertaken to generate data by which the hazards and risks to users can be assessed for pharmaceuticals (only preclinical studies). GLP helps assure regulatory authorities that data submitted is a true reflection of the results obtained during the study and can therefore be relied upon when making risk/safety assessments. Compliance with the principles of GLP is assured via monitoring by the MHRA. |
Good Manufacturing Practice ('GMP') | GMP is that part of Quality Management which ensures that products are consistently produced and controlled to the quality standards appropriate to their intended use and as required by the Marketing Authorisation, Clinical Trial Authorisation or product specification. GMP ensures that medicinal products do not place patients at risk due to inadequate safety, quality or efficacy. Compliance with the principles of GMP is assured via monitoring by the MHRA. |
Human Epidermal Growth Factor Receptor 2 (HER2) | HER2 is a protein the over-expression of which within a breast or gastric/gastro-oesophageal tumour sample may indicate a patient is suitable for treatment with Herceptin™. A test for such over-expression is carried out on all new breast cancer patients or patients with advanced stomach cancer. |
Human Papilloma Virus ('HPV') | HPV is a family of viruses that commonly infect human tissues. Several members of this family in particular genotype 16 & 18 are sexually transmitted and persistent infection with these subtypes plays a key role in the development of cervical intraepithelial neoplasia (CIN) and invasive cancer of the cervix. HPV infection is also associated with other cancers, including those of the head and neck. |
Histopathology | The study of changes in tissues and cells as a consequence of some disease or toxic processes. |
Human Tissue Authority ('HTA') | The HTA licenses organisations that store and use human tissue for purposes such as research, patient treatment, post-mortem examination, teaching and public exhibitions. The HTA also inspect organisations to check that they maintain good standards and follow appropriate procedures against the legislation of the Human Tissue Act 2004. |
ICH Tripartite Guidelines | Guidelines created by the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use ('ICH') to promote good clinical practice. |
Immunohistochemistry ('IHC') | IHC is a technique for visualising proteins and other molecules in thin sections of tissue. This technique uses antibodies raised in other species against the protein of interest as a tool, and exploits their exquisite sensitivity and specificity for binding to that protein. |
ISO9001 | ISO9001 is a universal quality management system which Source BioScience holds for various aspects of its business where there are not more stringent programmes available. |
K-RAS | K-RAS is a gene that produces an important cell signalling protein responsible for cell growth. The presence of a mutated form of the K-RAS gene in colorectal cancer may indicate that a patient is unsuitable for new anti-EGFR drugs such as Erbitux™ and Vectibix™. |
Liquid based cytology ('LBC') | LBC is a process for collecting and processing cervical cytology samples from epithelial tissues. It produces a cleaner preparation of cells, without the other materials which frequently contaminate the sample such as blood or mucus. |
Medicines and Healthcare products Regulatory Agency ('MHRA') | The MHRA is an executive agency of the UK government, sponsored by the Department of Health, which regulates medicines and medical devices in the UK, playing a leading role in protecting and improving public health and supporting innovation through scientific research and development. |
Microarray | Microarrays are a microscopic series of nucleic acid spots of known sequence which are deposited in a regular array typically onto a glass slide. A DNA or RNA probe can then be hybridised to the slide which results in a DNA or RNA fingerprint of the sample in the probe enabling scientists to determine genotypes or gene expressions levels. |
Next Generation DNA Sequencing ('NGS') | NGS refers generically to a set of recent technologies, in our case Illumina HiSeq™, Illumina MiSeq™ and Illumina NextSeq™ in which extremely large numbers of short sequences can be determined in a single experiment; for example the Illumina HiSeq2000™ selected by Source BioScience can sequence two human genomes in ten days. |
No further review ('NFR') | A unique feature of the FocalPoint™ automated cytology imaging platform that can identify up to 25% of cytology slides that are considered to be negative. These slides do not require further primary manual review, thereby improving the turnaround time and efficiency in the laboratory operations, saving time and cost for the NHS. |
Non-invasive prenatal testing ('NIPT') | A procedure which can identify fragments of foetal DNA in maternal blood. NIPT significantly reduces the need for invasive procedures, such as amniocentesis, which are currently used to screen for genetic abnormalities and which present a potential risk of miscarriage. |
Phosphate Buffered Serology Saline ('PBSS') | A standardised solution used as a wash solution for human red blood cells prior to blood grouping and serological antibody investigation. |
Physical testing | A qualitative or quantitative procedure that consists of determination of one or more characteristics of a given product to a specified procedure. Examples include: hardness testing, friability and particle counting. |
Polymerase Chain Reaction ('PCR') | PCR is a laboratory technique which specifically and exponentially amplifies a single or a few copies of a segment of DNA. The resulting product is an indicator of the presence of the original segment of DNA or the product can be used as the material for further experiments, for example genotyping or DNA sequencing. |
Proteomics | The study of specific amino acids, proteins or the entire proteome (a complete translated genome, see above) of an organism. Proteomic techniques include, for example, surveying complex biological samples for protein content, or determining the level of specific proteins in tissues using techniques like immunohistochemistry (IHC, see above). |
Qualified Person ('QP') | A person under EU pharmaceutical regulation deemed to be suitably qualified (e.g. a licensed pharmacist, biologist or chemist) and having several years' experience working in pharmaceutical manufacture, who is required to give oversight to the quality of production of a pharmaceutical compound within specified criteria for its use, prior to its release for sale or use in a clinical trial. |
Raw material testing | A test to ensure the quality and purity of raw materials used in manufacturing for the pharmaceutical, biotech and other industries. |
reSource™ | Brand name carried by the Source BioScience life science research product portfolio. |
Ribo Nucleic Acid ('RNA') | RNA is a molecule similar to DNA, but is an intermediate product between the DNA of the gene, and the ultimate protein product of that gene. The level of expression of a gene can be gauged by the amount of RNA synthesised from that gene, a process usually measured by quantitative real-time polymerase chain reaction ('Q-PCR'). |
RNA expression analysis | A process to measure the activity of a number of genes simultaneously, generating a global picture of cellular function. The expression analyses, or profiles, can distinguish between cells that are actively dividing, for example, or show how the cells react to a particular treatment. Testing of genome-wide RNA expression levels has historically been performed by microarray analysis but the experiments are now as likely to be performed by NGS. |
Serology | The study of general antigen-antibody reactions in a laboratory setting and the specific blood test conducted to test for the presence of antibodies. A serology test is performed to determine a patient's blood type and to test for and identify an infection. |
Sexually transmitted infection ('STI') | An infection that can be transferred from one person to another through sexual contact. Source BioScience offers Chlamydia screening services to various commissioning bodies as part of the National Chlamydia Screening Programme. |
Spectrometry | A technique that helps identify the amount and type of chemicals present in a sample by detecting certain absorbed, scattered or emitted wavelengths of light. Examples include: atomic absorption spectroscopy (AAS) and Fourier transform infrared spectroscopy (FTIR). |
SpeedREAD™ | The Source BioScience brand used to identify our fast overnight capillary sequencing services with less than 10 hour turnaround and pre 9am delivery of results. |
Stability storage services | The provision of validated ICH standard environmental facilities which vary in environmental factors, such as temperature, humidity and light. The purpose of stability testing is to provide evidence on how the quality of a substance or product varies with time in different environments and to establish a shelf life for the substance or product and recommend appropriate storage conditions |
Stability storage products | A range of modular walk-in and reach-in rooms and cabinets sold, serviced and validated by Source BioScience which are used by customers to achieve ICH standard environments in their own facilities for their own internal stability storage projects. |
Sterility testing | A test that critically assesses whether a sterilised component or product is free from viable contaminating micro-organisms. |
Validation | Installation Qualification (IQ), Calibration Qualification (CQ), Operational Qualification (OQ) and Performance Qualification (PQ) and all elements of equipment validation used in laboratory processes. Validation of equipment and environments, and the subsequent documentation, is an essential element of Stability Storage projects |
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