14th Aug 2006 07:00
Tepnel Life Sciences PLC14 August 2006 Tepnel Life Sciences plc ('Tepnel' or 'the Company') Interim results for the 6 months ended 30 June 2006 Manchester, UK, 14th August, 2006: Tepnel Life Sciences plc (AIM: TED), theUK-based international Research Products & Services and Molecular Diagnosticsgroup, is pleased to announce its interim results for the six month period ended30 June 2006. Highlights • Group sales totalled £8.16m, an increase of 18.4% over the same period last year (6 months ended 30 June 2005: £6.89m) comprising: • Research Products & Services sales increased by 20.9% to £3.47m (6 months ended 30 June 2005: £2.88m) • Molecular Diagnostics sales increased by 16.7% to £4.69m (6 months ended 30 June 2005: £4.01m) • Earnings before interest, tax, depreciation, amortisation and exceptional items were £409,000 (6 months ended 30 June 2005: £18,000) (Note 8) • Operating profit before exceptional items was £45,000 (6 months ended 30 June 2005: operating loss of £391,000) • Operating loss after exceptional items was £77,000 (6 months ended 30 June 2005: operating loss of £391,000) • Pre-tax losses for the Group decreased by 66% to £123,000 (6 months ended 30 June 2005: £361,000) • Net cash outflow from operating activities was £414,000 (6 months ended 30 June 2005: £574,000) • All acquisitions are now integrated into the two operating divisions, Molecular Diagnostics and Research Products and Services • Significant improvements in realising synergies both operationally and within the sales & marketing functions Ben Matzilevich, CEO, stated "Our strategy has been to identify significantmolecular diagnostic and research product niche market opportunities and to takeleadership positions in these sectors. We are especially gratified to see that sales of our genomic products andservices have more than doubled in the first half of this year compared to thesame period last year. Sales of Molecular Diagnostic reagents for organtransplantation monitoring (bone marrow, kidney, liver, heart, etc.) haveincreased by 40% over the same period last year. These are two importantmarkets where we have invested resources and focused our energies and are nowseeing the benefits of those efforts with sales and profit growth. In all sectors we are competing with large global players and we have chosen tocompete by targeting superior products into selected regional markets focusingon highly specialized applications backed up by strong technical support. Ournew facilities in Scotland, where we began construction this month, will give usthe laboratories we need to maintain our growth and expand our genomic andproteomic product lines. We believe that close attention to the bottom line and expanded sales andmarketing efforts into the USA, as well as our strong product pipeline, willhelp position Tepnel for continued growth and improved profitability." CHAIRMAN'S STATEMENT Interim Results for the 6 months ended 30 June 2006 Financial Results In the six months ended 30 June 2006, turnover for the Group increased by 18.4%to £8.16m (6 months ended 30 June 2005: £6.89m). Operating profit before exceptional items was £45,000 (6 months ended 30 June2005: operating loss of £391,000). Pre-tax losses for the Group during the period decreased by 66% to £123,000(6 months ended 30 June 2005: £361,000). The loss per share during the period decreased to 0.04p (6 months ended 30 June2005: 0.1p). Cash and cash equivalents at the end of the period were £2.89m (30 June 2005:£1.81m). Overview The first half of 2006 has marked the beginning of a very significant year forTepnel, one that has seen the Company reach a turning point in its history. I amdelighted to report that in the first six months Tepnel has made its first everoperating profit before exceptional items and I firmly believe that the Companywill now continue to build on this success. We are reaping the benefits of the strategic reorganisation that we made in 2005following our earlier acquisitions of Orchid Diagnostics and Diaclone. Everypart of the Company has now been fully integrated into our two operatingdivisions and consequently we have been able to benefit from the operational andsales and marketing synergies that we anticipated. Revenues have continued to grow at levels beyond the sector average withhalf-year sales totalling £8.16m, 18.4% ahead of the same period last year,continuing to build on 2005's organic growth over and above that resulting fromour acquisitions. Overall operating profits before exceptional items for the 6 months ended 30June 2006 were £45,000 and after exceptional items we saw a small operating lossof £77,000 (6 months ended 30 June 2005: operating loss of £391,000). Three further highlights of the first half of this year included the completionin February of the land purchase in Livingston, Scotland for our new dedicatedpharmaceutical, protein and genomic analysis facility which is expected to befully operational during the second quarter of 2007. The Company also made afurther small acquisition in early March by purchasing the GenXTrak DNAextraction business from UK-based Whatman plc. Finally, we secured a further£1.2m of capital in June through a share placing with proceeds to be used inpart to fund the Company's new facility in Scotland and to provide additionalworking capital required as a consequence of our increased sales. Molecular Diagnostics Sales for the 6 months ended 30 June 2006 for the Molecular Diagnostics Divisionwere 16.7% ahead of the previous year. Sales of leading products increasedsignificantly and new product development and new product launches continued.Sales of our Elucigene(TM) assays for simple and rapid mutation detectioncontinued to improve and in particular we saw increased sales of the CF-HT kitfor detecting genetic mutations for cystic fibrosis that we launched in 2005. Wealso launched and saw first sales of our QST*R test for rapid detection offoetal abnormalities such as Down Syndrome. As we experienced last year, the LifeMatch(R) antibody detection system for usewith Luminex(TM) multiplex analysis technology has continued to capture marketshare with a further 40% sales growth in the HLA typing marketplace for organtransplant diagnostics during the first half of 2006. The system benefits fromhigh sensitivity, rapid assay times and optimal reagent use. We continue todevelop other LifeMatch(R) products to further expand this successful productline. Research Products & Services Overall sales from Tepnel's Research Products & Services Division for the 6months ended 30 June 2006 were 20.9% ahead of the same period last year. Thisdivision comprises the Group's activities in genomic services, outsourcingservices for the pharmaceutical and healthcare industries, food testing andimmunological reagents businesses. Sales from our genomics services group have increased by over 100% compared tothe prior year and we have also seen significant growth in sales of otherservices outsourced from the pharmaceutical industry such as analyticalchemistry, bioanalysis and stability testing. This continued upward demand fromthe pharmaceutical and biotechnology sectors has made the construction of our18,000 square foot state-of-the-art facility in Scotland essential. The newfacility will allow us to add significant capacity, deliver services of thehighest quality at competitive prices and maintain our position as a sectorleader in both genetic and protein analysis. Our leadership in this area hasbeen further underlined by our recent appointment as preferred suppliers toAstraZeneca for certain genomic services and the signing of a quality agreementwith Pfizer, one of the world's leading pharmaceutical companies. Under thescope of this agreement Tepnel has been selected as a supplier to Pfizer foranalytical chemistry and specialized microbiological services. Our acquisition in March of the Cambridge-based GenXTrak(TM) business fromWhatman plc expanded our DNA extraction offering and now positions the Companyas one of Europe's largest providers of DNA extraction services. Our food testing business has continued to do well this year and we saw furtherrevenue growth from sales of food allergen test kits as we increased US marketpenetration made possible by distribution through our facility in Stamford,Connecticut. This is another example of how we are benefiting fromorganisational synergies. We also continued development of new allergen kits,including Hazelnut, Almond, Walnut and Crustacea, and immunological reagentsproducts. Prospects The Company has had a record first six months in 2006. Operational synergiesthat we foresaw in 2005 have helped to improve our margins and we have grown ourrevenues after streamlining the business around profitable, core operations. Through the remainder of 2006, the Company will pursue aggressive revenue growthwhile planning for sustainable future success through a combination ofintelligent strategic planning, more intensive marketing of the company and itsproducts, and a continued focus on increasing efficiencies. We remain committed to building value in the Company for our shareholders, whilecreating a challenging and rewarding workplace for our employees. Alec CraigNon-Executive Chairman14th August 2006 For Further Information: Tepnel Life Sciences plcBen Matzilevich, CEO0161 946 2200 Seymour PierceMark Percy, Corporate Finance0207 107 8000 De Facto CommunicationsRichard Anderson / Deborah Cockerill020 7861 3838 Notes to Editors About Tepnel Life Sciences plc Tepnel Life Sciences (TLS) is a UK based international biotechnology company.The Company has laboratories, manufacturing and operations in the USA, UK andFrance with 195 employees. TLS provides test kits, reagents and services to twohighly synergistic markets, these being Molecular Diagnostics and BiomedicalResearch. The company's strategy has been to identify high growth nicheopportunities within these multi-billion pound markets. TLS focuses on theseniche opportunities with internally developed products, patents, expertise andknow-how as well as strategic acquisitions, to develop a leadership positionwithin these defined market segments. Consolidated Profit & Loss Account for the 6 months ended 30 June 2006 Audited 6 months Year ended 6 months Note ended 30 31 December ended 30 June 2006(1) 2005 June 2005 1,2 £'000 £'000 £'000Turnover 2 8,164 13,602 6,893Cost of sales - normal (4,009) (6,718) (3,301)Cost of sales - exceptional 3 - (556) -Total cost of sales (4,009) (7,274) (3,301)Gross profit 4,155 6,328 3,592 Administrative expenses - normal (1,861) (3,528) (1,821)Administrative expenses - exceptional 3 (122) (419) -Total administrative expenses (1,983) (3,947) (1,821)Research and development costs (895) (1,738) (865)Sales and distribution costs (1,354) (2,542) (1,297) Operating loss (77) (1,899) (391)Interest receivable 35 89 35Interest payable (81) (205) (5)Loss on ordinary activities before (123) (2,015) (361)taxationTaxation 36 110 69Loss for the financial period (87) (1,905) (292) Basic and diluted loss per share 4 0.04p 0.9p 0.1p Operating profit/(loss) excluding 45 (924) (391)exceptional items Statement of Total Recognised Gains and Losses for the 6 months ended 30 June 2006 Audited 6 months Year ended 6 months ended 30 June 31 December ended 30 2006(2) 2005 June 2005(1) £'000 £'000 £'000Loss for the financial period (87) (1,905) (292) Currency translation differences on retranslation of subsidiary undertakings (19) 14 (21) Total gains and losses recognised sincelast annual report (106) (1,891) (313) Consolidated Balance Sheet as at 30 June 2006 30 June 2006(3) Audited 31 December 30 June Note 2005 2005(1) £'000 £'000 £'000Fixed assetsIntangible assets 1,630 1,665 1,762Tangible assets 1,679 1,500 1,675 3,309 3,165 3,437Current assetsStocks 2,745 2,247 2,412Debtors 3,819 3,140 3,615Cash at bank and in hand 2,893 2,279 1,807 9,457 7,666 7,834Creditors: amounts falling due within one (5,930) (4,937) (4,025)year Net current assets 3,527 2,729 3,809Total assets less current liabilities 6,836 5,894 7,246Creditors: amounts falling due after more (92) (20) -than one yearProvisions for liabilities and charges - (190) -Net assets 6,744 5,684 7,246 Capital and reservesCalled up share capital 2,302 2,132 2,129Share premium account 34,597 33,601 33,588Profit and loss account (30,155) (30,049) (28,471)Shareholders' funds 6 6,744 5,684 7,246 Consolidated Cash Flow Statement for the 6 months ended 30 June 2006 Audited 6 months 6 months Year ended ended ended 30 31 December 30 June June 2006(4) 2005 2005(1) £'000 £'000 £'000Consolidated cash flow statementNet cash outflow from operating activities (414) (171) (574)Returns on investments and servicing of finance 32 75 30Corporation tax refund 75 90 -Capital expenditure (315) (230) (125)Acquisitions (40) - -Net cash outflow before financing (662) (236) (669)Financing 1,280 (41) (66)Increase/(decrease) in cash 618 (277) (735) Audited 6 months 6 months Year ended ended ended 30 31 December 30 June June 2006(1) 2005 2005(1) £'000 £'000 £'000 Reconciliation of operating loss to net cashoutflow from operating activities:Operating loss (77) (1,899) (391)Depreciation 263 555 300Impairment - 84 -Amortisation 101 197 109Loss on disposal of fixed assets - 25 -(Increase)/decrease in stocks (551) 101 (133)Increase in debtors (888) (336) (619)Increase in creditors 738 1,102 160Net cash outflow from operating activities (414) (171) (574) Audited 6 months 6 months Year ended ended ended 30 31 December 30 June Note June 2006(5) 2005 2005(1) £'000 £'000 £'000 Reconciliation of net cash flow tomovement in net fundsIncrease/(decrease) in cash 618 (277) (735)Cash outflow from decrease in lease 20 144 66financingChange in net funds resulting from cash 638 (133) (669)flowsInception of finance leases (134) (20) -Exchange differences (4) 14 -Net funds at beginning of period 2,259 2,398 2,398 Net funds at end of period 5 2,759 2,259 1,729 Notes to the interim financial statements 1 Basis of preparation The interim financial information has been prepared on the basis of accounting policies consistent with those applied in the 2005 financial statements, except where noted below. The financial information is unaudited and has been approved by the directors. The financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2005 have been filed with the Registrar of Companies and contained an unqualified audit opinion. The Group has implemented FRS 20 'Share-based payments' during the period and taken advantage of the transitional provisions in respect of share-based payments granted and fully vested before 1 January 2006. There has been no change to current year or prior year financial statements in respect of the implementation of this standard. Certain costs in the profit and loss account for the 6 months ended 30 June 2005 have been reclassified between cost captions. There is no change to turnover or operating profit as a result of this reclassification which relates to the allocation of costs between cost of sales, administrative expenses, sales and distribution, and research and development costs. This has been done to ensure the classification is consistent with the accounts for the year ended 31 December 2004 and 2005 and with the accounts for the 6 months ended 30 June 2006. The effect of this reclassification on the accounts for the 6 months ended 30 June 2005 is to decrease gross profit by £497,000, decrease administrative expenses by £285,000, decrease sales and distribution costs by £124,000 and decrease research and development costs by £88,000. 2 Segmental analysis 6 months ended 30 June 2006(6) Turnover by geographical Research Products Molecular destination and Services Diagnostics Total £'000 £'000 £'000 UK 1,795 252 2,047 Rest of Europe 1,356 1,011 2,367 US 191 2,079 2,270 Asia 37 1,147 1,184 Rest of World 97 199 296 3,476 4,688 8,164 Audited Year ended 31 December 2005 Turnover by geographical Research Products Molecular Totaldestination and Services Diagnostics £'000 £'000 £'000UK 3,191 670 3,861Rest of Europe 1,912 1,582 3,494US 540 3,599 4,139Asia 74 521 595Rest of World 164 1,349 1,513 5,881 7,721 13,602 6 months ended 30 June 2005(1) Turnover by geographical Research Products Molecular Totaldestination and Services Diagnostics £'000 £'000 £'000UK 1,624 300 1,924Rest of Europe 1,111 875 1,986US 72 1,877 1,949Asia 6 342 348Rest of World 63 623 686 2,876 4,017 6,893 (1) Neither audited nor reviewed. 3 Exceptional items 6 months Audited 6 months ended 30 Year ended ended 30 June 2006(7) 31 December 2005 June 2005(1) Cost of sales - exceptional items £'000 £'000 £'000 Provision for slow - 556 - moving/obsolete stock lines(3) - 556 - Administrative expenses - exceptional items Settlement of unfair dismissal 122 - - claim(1) Provision for unfair dismissal - 190 - claim(2) Fixed asset impairment(4) - 84 - Legal and other charges(5) - 145 - 122 419 - Total exceptional items 122 975 - 2006 1 Settlement of unfair dismissal claim On 24 May 2006, the Group settled the unfair dismissal claim brought by formerGroup Finance Director, Mr G P Ffoulkes-Davies. The £122,000 charge reflects thesettlement made in excess of the provision made in 2005 (see below) as well asassociated legal costs incurred. As part of this settlement Mr G PFfoulkes-Davies paid in full the outstanding unpaid share capital of £134,500 onthe 3,000,000 shares purchased in 2004, together with the interest accrued onthis amount. 2005 2 Provision for unfair dismissal claim On 29 November 2005, the Group terminated the employment contract of Mr G PFfoulkes-Davies, Group Finance Director. Mr G P Ffoulkes-Davies had brought aclaim for unfair dismissal in the Manchester Employment Tribunal and a defenceto this action had been filed. The Group made a provision of £190,000 against any potential award against theGroup for unfair dismissal and any action that may be brought in respect ofbreach of contract. 3 Provision for slow moving/obsolete stock lines The exceptional charge for slow moving/obsolete stock was £556,000. The Group isconstantly improving and developing its product range and during 2005 a reviewof all stock lines across the Group was undertaken and a provision made for slowmoving or obsolete lines. In particular, the success of the Lifematch HLA systemled to slower sales of its RFLP HLA products. The majority of the provision relates to individual stock items within thisproduct line which were acquired with the acquisition of Tepnel Lifecodes. 4 Fixed asset impairment The development of the Group's product range led to several capital items nolonger being used within the business. These items were fully written downduring 2005 and the total of the impairment charge was £84,000. 5 Legal and other charges The Group had exceptional legal and other charges during 2005 of £145,000. Theseprincipally relate to corporate finance and distribution agreements advice, butalso include lease dilapidation and grant repayment charges. 4 Loss per share The basic and diluted loss per share has been calculated on the following basis: 6 months Audited ended Year ended 6 months 30 June 31 December ended 30 2006(8) 2005 June 2005(1) Loss for the period (£'000) (87) (1,905) (292) Weighted average number of shares 215,435,988 213,021,836 212,927,315 Basic and diluted loss per share 0.04p 0.9p 0.1p The basic and diluted loss per share are the same because losses have beenincurred which result in all potentially dilutive shares being treated asanti-dilutive. 5 Analysis of changes in net funds Non-cash 30 June 1 January 2006 Cash flow movement 2006(1) £'000 £'000 £'000 £'000 Cash at bank and in hand 2,279 618 (4) 2,893 Finance leases (20) 20 (134) (134) Net funds 2,259 638 (138) 2,759 6 Reconciliation of movement in shareholders' funds Audited 6 months Year ended 6 months ended 30 June 31 December ended 30 2006(9) 2005 June 2005(1) £'000 £'000 £'000 Loss for the period (87) (1,905) (292) Other recognised gains/(losses) in the (19) 14 (21) period Issue of shares (including premium) 1,192 17 - Less issue costs (26) (1) - Net increase/(reduction) in 1,060 (1,875) (313) shareholders' funds Opening shareholders' funds 5,684 7,559 7,559 Closing shareholders' funds 6,744 5,684 7,246 7 Acquisition In March 2006, the Group completed the £30,000 acquisition of the GenXTrak DNAextraction business from UK-based Whatman plc. The Cambridge based GenXTrakbusiness now operates within Tepnel's service division, offering rapid andreliable extraction, purification, quantification and normalisation of clinicalDNA samples. This acquisition has not been disclosed separately in the 6 monthsended 30 June 2006 financial information on grounds of materiality. 8 Additional financial information Reconciliation of operating loss to profit/(loss) before interest, tax, depreciation, amortisation (EBITDA) and exceptional items Audited 6 months ended Year ended 6 months 30 June 31 December ended 30 2006(1) 2005 June 2005(1) £'000 £'000 £'000 Operating loss (77) (1,899) (391) Exceptional items 122 975 - Depreciation 263 555 300 Amortisation 101 197 109 EBITDA pre exceptional items 409 (172) 18 9 Dividends The directors do not recommend the payment of an interim dividend in respect of the 6 months ended 30 June 2006. Copies of this statement are being sent to all shareholders and will be available to the public at the Company's Registered office at Heron House, Oaks Business Park, Crewe Road, Wythenshawe, Manchester M23 9HZ. --------------------------------------- (1) Neither audited nor reviewed. 2 See Note 1 (2) Neither audited nor reviewed. (3) Neither audited nor reviewed. (4) Neither audited nor reviewed. (5) Neither audited nor reviewed. (6) Neither audited or reviewed (7) Neither audited nor reviewed. (8) Neither audited nor reviewed. (9) Neither audited nor reviewed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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