RNS Number:6152J
BBI Holdings PLC
11 December 2007
11 December 2007
INTERIM RESULTS
For the 6 months ended 30 September 2007
BBI Holdings Plc ("BBI" or "the Group"), the AIM listed developer and
manufacturer of rapid result diagnostic tests and reagents for the diagnostic
industry, announces interim results for the year ended 30 September 2007.
BBI operates in three main areas:
1. Diagnostics - specialising in the development and manufacture of non-invasive
lateral flow tests which can give a quick and effective diagnosis to patients at
the bedside or in a doctor's surgery without recourse to costly and
time-consuming laboratory analysis.
2. Healthcare - specialising in the sale and distribution of diabetes and
healthcare related products
3. Enzymes - following the acquisiton of Theratase plc BBI is a world leader in
natural enzyme manufacture which significantly expands BBI's reagent capacity
across a broad range of auto analyser diagnostics.
Financial Highlights:
* Turnover up 115% to �9.55m (2006: �4.43m)
* Gross profit up 85% to �5.17m (2006: �2.80m)
* Operating profit up 43% to �1.14m (2006: �0.80m)
* EBITA (after share based payments) up 76.5% to �1.64m (2006: �0.93m)
* Basic EPS of 1.62p (2006: 2.33p) - influenced by shares issued
for Theratase acquisition
Other Highlights
* Acquisition of Alchemy Laboratories Ltd in May 2006
* Acquisition of Theratase successfully completed to form BBI's Enzyme Division
* Theratase and earlier acquisitions delivering significant increase in revenue
* 510k clearances on two products developed and manufactured by BBI: Verax PGD
and Focus HSV-2 assays
* BBI's quality gold accredited globally as benchmark reference standard by
NIST (The National Institute of Standards and Technology)
* Launch of Hypobox - the integrated hypoglycaemia solution
* Management strengthened with recruitment of two new divisional CEOs
* New Cardiff premises due to team expansion
David Evans, Chairman, said:
"In my statement in the 2007 report and accounts, I explained that the impact of
a number of opportunities would be experienced in the second half of the current
year. We have made good progress towards achieving our goals for this year, and
while our growth targets remain stretching and demanding we remain confident
that they can be achieved.
"Our acquisition strategy remains extremely important. A number of opportunities
are being progressed, and I look forward to reporting on these in the near
future."
For further information:
BBI Holdings plc Cenkos Securities plc Parkgreen Communications Ltd
Julian Baines, CEO Ian Soanes / Adrian Hargrave Paul McManus
Tel: 029 2074 7232 Tel: 020 7397 8900 Tel: 020 7479 7933
Mob. 07980 541 893
www.bbigold.com Email: paul.mcmanus@parkgreenmedia.com
Background notes:
About BBI Holdings PLC (LSE: BBI):
BBI specialises in the development and manufacture of non-invasive lateral flow
tests, or In Vitro Diagnostics (IVD). Such tests offer a rapid and cost
effective diagnosis for the Point of Care (POC) market, as they are not
laboratory based and can be used at the bedside/doctor's surgery.
BBI derives income from four core areas within the research, development, and
manufacture of IVDs:
Gold Colloid/Conjugate Manufacture. BBI has achieved a global reputation for
manufacturing superior quality gold reagents. These are bound to specific
antibodies or antigens and incorporated into diagnostic tests, to provide a
positive or negative visual signal. Gold is an excellent indicator for
sensitivity-based tests.
Contract Product Development. BBI has many years' experience in working with
customers to develop rapid point of care tests. The first project entered into
in 2001 was with Merck to develop five rapid tests to detect food-borne
pathogens. Since then BBI has worked with many leading diagnostic companies
including Phadia (formerly Pharmacia Diagnostics), Kimberley Clark, and Becton
Dickinson.
Rapid Test Manufacture. BBI can manufacture tests in the UK or the US. Rapid
test manufacture involves placing conjugate onto a pad or strip and enclosing
this within a preformed plastic package 'housing' designed to the customer's
specifications. BBI expects this area to grow significantly over the coming
years, as more and more contract development projects are transferred to
manufacture and products launched in the market place.
BBI Healthcare. In April 2004 BBI acquired Hypostop (now renamed GlucoGel in the
UK). GlucoGel is an easy to use dextrose gel which is recommended by the
National Institute for Clinical Excellence (NICE) to manage hypoglycaemia. In
July 2006 BBI acquired a talking blood glucose meter reader for the visually
impaired called SensoCard plus. The acquisition gives BBI exclusive distribution
rights for SensoCard plus within the UK and shared rights for the US, Canada and
India.
Chairman's statement
Introduction and overview
I am pleased to report that the Group has continued to perform strongly in the
first six months of 2007-08. Turnover for the period is up 115.4% over the
equivalent period last year and while much of this growth comes from the
acquisition of Theratase we have continued to see organic growth, with the group
excluding Theratase having delivered revenue growth of 17.7% in the first six
months. Profit growth has continued with operating profit up 42.9%.
Strategy
BBI's business is the development, manufacture and supply of diagnostic
reagents, rapid tests, and products to assist the management of diabetes. The
Group's aim is to grow and develop the business through:
* Investing in new technology, both through forming strategic alliances with
early- to mid-stage technology companies such as Quotient Diagnostics,
Platform Diagnostics and GeneEx and through the internal development of
intellectual property
* Protecting and growing our core businesses
* Making further acquisitions in related areas where we can add value by
introducing our successful commercial strategy to them.
Operating Review
Diagnostics Division
The division's business is the supply of colloidal gold, and the contract
development and manufacture of lateral flow point of care tests. Diagnostics,
under the leadership of Lyn Rees, represented 39% of total group turnover for
the period, and has continued to show strong growth. The highlights for the
division in the first six months include the achievement of two 510(k)
clearances by our customers for products we designed and which we manufacture.
The most important of these is for Verax's PGD test for bacterial contamination
in blood platelets. Full scale manufacture of this test will commence in the
second half of the year. The second 510(k) covers Focus's HSV-2 test which uses
BBI's patented technology for the separation of HSV-2 (genital herpes) from the
more common and less serious HSV-1 (cold sore) virus. Focus have product
marketing rights for the USA and Europe: BBI retains the rights for the rest of
the world, and is currently considering its options for commercialisation of the
product in these markets.
In addition the division has benefited from the contribution from the Simplify
and SimpiRED products acquired in March 2007 from Agen. Production of these
products is in the process of being transferred from Australia to the Group's
facility in Dundee and will come fully on stream during the early part of 2008,
leading to a margin improvement. During the period the Group has incurred
�140,000 in relation to the product transfer which has been charged to the
profit and loss account.
Diagnostics has facilities in Cardiff, Dundee, Glasgow, and Madison in the USA.
Life Sciences Division
Dr Peter Corish has joined the Group to head our new Life Sciences division. The
key goals of this division are to extend BBI's reputation and revenue in the
life science research, molecular diagnostics, and nanoparticle markets, and to
identify, evaluate and acquire next-generation Point of Care diagnostics in
support of BBI's core business strategy. Life Sciences will be reported
separately from 2008-09.
Healthcare Division
Healthcare distributes a range of products for use by diabetics from its base in
Swansea, and represents 16% of turnover. The division's flagship product is
GlucoGel, a dextrose gel used by diabetes patients when they experience
hypoglycaemia. In addition the Healthcare division distributes GlucoTabs, a
glucose tablet, and Sensocard Plus, a talking blood glucose meter designed for
use by the visually impaired. The division has been successful in placing
GlucoTabs with a wide range of wholesalers and retailers including Boots and
Asda. Work to achieve 510(k) clearance for Sensocard Plus in the USA continues.
Useful feedback has been received and clearance is now anticipated for the first
half of calendar 2008.
In November, Healthcare launched Hypobox, a solution designed for use on
hospital wards or in the workplace for the treatment of hypoglycaemia. Hypobox
contains both GlucoGel and GlucoTabs, as well as some third party products and
information on treatment of an attack. This offering has been well received by
our target audience.
BBI is pleased that Mike Younghusband, formerly UK managing director of
Axis-Shield, has recently joined the Group as the CEO of the Healthcare
division.
Enzyme Division
On 15 May 2007, the Group completed the acquisition of Theratase plc for a total
consideration of �24m in cash and shares. As part of this acquisition the
convertible loan stock of �7.5m was converted into ordinary shares. Theratase
now forms BBI's Enzyme division, and in the first half of 2007/08 represented
45% of Group turnover. The division has two operating businesses, Biozyme, based
in Blaenavon in South Wales, and Seravac, which is located in Cape Town, South
Africa. There is also a shared sales office in San Diego.
The Enzyme Division has continued to have great success supplying glucose
oxidase to manufacturers of blood glucose meters for use by diabetics. To
maximise the Division's future potential, improved commercial resources have
been made available and further capital resources will need to be expended for
the Group to maintain and grow this division.
Following the acquisition of Theratase, Colin Anderson and John Chesham, who
continues to lead the division, have both joined the BBI board as executive
directors.
Financial Review
International Financial Reporting Standards
These are the first interim accounts produced by the Group in accordance with
International Financial Reporting Standards (IFRS). Comparative financial
information for 2006/07 has been adjusted in accordance with IFRS. A
reconciliation of the differences between IFRS and UK GAAP is given in note 11
of this report.
Turnover
Turnover has increased by 115.4% over the same period last year to �9.55m (2006:
�4.43m). Of the increase, �4.33m was contributed by Theratase which was acquired
during the period. Continuing businesses grew by 17.7% to �5.22m, with
Diagnostics growing by 21.6% and Healthcare by 9.0%.
Gross Margin
Gross profit has increased by 84.7% to �5.17m (2006: �2.80m). The gross margin
percentage of 54% (2006: 63%) has been influenced both by the acquisition of
Theratase and by additional production resources within Diagnostics in
anticipation of second half growth.
Other operating expenses
Other operating expenses (excluding the amortisation of intangibles) have
increased by 85.7% from �1.94m to �3.60m. At 30 September 2007 the Group
employed 258 people, up from 119 at the equivalent point last year.
Operating profit and earnings per share
Operating profit, which is stated after amortisation of intangibles and a charge
for share-based payments of �72,000 (2006: �70,000), has increased by 42.9% to
�1.14m (2006: �0.80m). The Group believes that earnings before interest tax and
amortisation (EBITA) is a more useful measure of underlying performance. EBITA,
after taking out the effect of share based payments, is �1.64m (2006: �0.93m),
an increase of 76.5%.
Basic earnings per share of 1.62p per share (2006: 2.33p) have been influenced
by the shares issued in the first half in connection with the acquisition of
Theratase.
Dividends
BBI paid a dividend of 0.5p per ordinary share in existence prior to the
acquisition of Theratase on 31 May 2007, at a total cost of �134,000.
Balance Sheet
Following the acquisition of Theratase and the acquisition of product technology
from Agen, goodwill and other intangible assets have increased to �35.0m (2006:
�8.9m). The increase in investments is largely the result of further investments
in Platform Diagnostics made in line with the agreement with that company and
Carclo Plc and the investment the Theratase Group has in Alloksys Life Sciences
B.V.
Inventories have significantly increased to �3.34m (2006: �0.49m) largely as a
result of the Theratase acquisition, as have trade and other receivables (2007:
�4.90m, 2006: �1.81m), and current trade and other creditors (2007: �3.53m,
2006: �0.72m).
Total equity has increased by 206% to �35.87m (2006: �11.73m).
Cash and Debt
The acquisition of Theratase was partly funded by new debt from Barclays Bank
plc. As a result, the Group has net debt at the end of September of �2.57m
(2006: net cash of �0.85m).
Outlook
The acquisition of Theratase has accelerated the Group's transformation into a
significant player in the world diagnostic reagents business. As a supplier of
the key component into over 4.5 billion tests worldwide per annum, the Group can
now count all the world's top diagnostics businesses amongst its customer base.
In my statement in the 2007 report and accounts, I explained that the impact of
a number of opportunities would be experienced in the second half of the current
year. We have made good progress towards achieving our goals for this year, and
while our growth targets remain stretching and demanding we remain confident
that they can be achieved.
Our acquisition strategy remains extremely important. A number of opportunities
are being progressed, and I look forward to reporting on these in the near
future.
The future success of the Group is dependent on its ability to attract and
retain staff of a high calibre. I would like to extend my and the Board's thanks
to all of BBI's employees whose hard work and dedication has been vital to the
Group's success so far. I would also like to thank our investors for their
support in providing a base upon which the Group's future can be built.
David Evans
11 December 2007
Condensed consolidated income statement
Six months ended 30 September 2007 (unaudited)
Note Six months Six months Year ended
ended 30 ended 30 31 March as
September September restated
2007 as restated (see note
�'000 (see note 11) 2007
11)2006 �'000
�'000
Revenue 3 9,546 4,431 9,732
Cost of sales (4,378) (1,633) (3,428)
Gross profit 5,168 2,798 6,304
Amortisation of intangible (424) (59) (163)
assets
Other administration expenses (3,602) (1,940) (4,003)
Total administration expenses (4,026) (1,999) (4,166)
Operating profit 1,142 799 2,138
Investment revenues 41 26 33
Finance costs (286) (48) (150)
Profit before tax 897 777 2,021
Tax 4 (269) (182) (548)
Profit for the period 628 595 1,473
Earnings per share
Basic 6 1.62p 2.33p 5.63p
Diluted 6 1.49p 1.79p 4.31p
All activities derive from continuing operations.
Condensed consolidated balance sheet
As at 30 September 2007 (unaudited)
30 30 31
September September March
2007 2006 2007
�'000 �'000 �'000
Assets
Non-current assets
Goodwill 21,867 6,742 7,665
Other intangible assets 13,152 2,109 3,462
Property, plant and equipment 3,983 1,637 1,904
Investments 1,131 702 784
Deferred tax asset 269 75 51
40,402 11,265 13,866
Current assets
Inventories 3,343 486 583
Trade and other receivables 4,896 1,806 2,800
Current asset investment - - 7,500
Cash and cash equivalents 3,063 2,092 1,490
11,302 4,384 12,373
Total assets 51,704 15,649 26,239
Equity
Share capital 1,073 669 669
Share premium account 33,269 10,808 10,793
Own shares (274) - -
Translation reserves (74) - -
Retained earnings 1,873 250 1,209
Total equity 35,867 11,727 12,671
Liabilities
Non-current liabilities
Bank loans 4,454 825 1,670
Deferred tax liabilities 3,945 711 1,038
Long-term provisions 949 538 956
Total non current liabilities 9,348 2,074 3,664
Current liabilities
Trade and other payables 3,533 719 980
Current tax liabilities 996 578 800
Bank overdrafts and loans 1,179 417 624
Convertible loan stock - - 7,500
Provisions 781 - -
Dividends - 134 -
Total current liabilities 6,489 1,848 9,904
Total liabilities 15,837 3,922 13,568
Total equity and liabilities 51,704 15,649 26,239
Condensed consolidated cash flow statement
Six months ended 30 September 2007 (unaudited)
30 30 31
September September March
2007 2006 2007
�'000 �'000 �'000
Profit for the year 628 595 1,473
Adjustments for:
Investment revenues (41) (26) (33)
Finance costs 286 48 150
Income tax expense 269 182 548
Depreciation of property, plant and equipment 233 85 199
Amortisation of intangible assets 424 59 163
Foreign exchange gains - - (58)
Share-based payment expense 72 70 152
Operating cash flows before movements in working 1,871 1,013 2,594
capital
(Increase)/decrease in inventories (255) 65 (32)
Increase in receivables (1,100) (45) (1,458)
Increase/(decrease) in payables 147 (410) 276
Movements on provisions (120) - -
Cash generated by operations 543 623 1,380
Income taxes paid (177) (127) (366)
Interest paid (286) (48) (92)
Net cash from operating activities 80 448 922
Condensed consolidated cash flow statement
Six months ended 30 September 2007 (unaudited)
30 30 31
September September March
2007 2006 2007
�'000 �'000 �'000
Net cash from operating activities 80 448 922
Investing activities
Interest received 41 26 33
Increase in trade investments (138) (410) (491)
Proceeds from sale of shares in ESOP 86 - -
trust
Proceeds on disposal of property, plant 1 - -
and equipment
Purchases of property, plant and (472) (190) (477)
equipment
Purchases of intangible assets (72) - (25)
Net cash acquired with subsidiary 2,028 2,087 2,087
Acquisition of subsidiary (9,607) (3,964) (5,571)
Net cash used in investing activities (8,133) (2,451) (4,444)
Financing activities
Dividends paid (134) - (134)
Repayments of borrowings (1,606) (29) (293)
Repayments of obligations under finance
Leases (32) (10) (14)
New finance leases - 10 10
Proceeds on issue of shares 7,675 2,672 2,672
New bank loans raised 3,723 - 1,319
Net cash from financing activities 9,626 2,643 3,560
Net increase in cash and cash equivalents 1,573 640 38
Cash and cash equivalents at beginning of 1,490 1,452 1,452
period
Cash and cash equivalents at end of 3,063 2,092 1,490
period
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.
Consolidated statement of recognised income and expense
Six months ended 30 September 2007 (unaudited)
Six months Six months Year
ended 30 ended 30 ended 31
September September March 2007
2007 2006 �'000
�'000 �'000
Foreign exchange translation (74) - -
differences
Net expense recognised directly (74) - -
in equity
Profit for the period 628 595 1,473
Total recognised income for the year all 554 595 1,473
attributable to equity holders of the
parent
Condensed consolidated statement of changes in equity
As at 30 September 2007 (unaudited)
Share Share Own Foreign Retained Total
Capital premium shares exchange earnings Equity
�'000 account �'000 reserve �'000 �'000
�'000 �'000
Balance at 31 March 2006 as 560 6,985 - - (267) 7,278
previously reported
IFRS adjustments - - - (15) (15)
At 31 March 2006 (under IFRS 560 6,985 - - (282) 7,263
-unaudited)
Profit for the period - - - - 595 595
New shares issued (net of 109 3,823 - - - 3,932
expenses)
Equity-settled share-based - - - - 70 70
payments
Dividends - - - - (133) (133)
Balance at 30 September 2006 669 10,808 - - 250 11,727
Profit for the period - - - - 878 878
Expenses of share issue - (15) - - - (15)
Equity-settled share-based - - - - 82 82
payments
Dividends - - - - (1) (1)
Balance at 31 March 2007 669 10,793 - - 1,209 12,671
Profit for the period - - - - 628 628
New shares issued (net of 404 22,476 - - - 22,880
expenses)
ESOP - - (274) - 98 (176)
Equity-settled share-based - - - - 72 72
payments
Foreign exchange adjustments - - - (74) - (74)
Dividends - - - - (134) (134)
Balance at 30 September 2007 1,073 33,269 (274) (74) 1,873 35,867
NOTES TO THE INTERIM REPORT
Six months ended 30 September 2007
1 BASIS OF PREPARATION AND ACCOUNTING
The next annual financial statements for the group will be prepared in
accordance with International Financial Reporting Standards as adopted for use
in the EU ("IFRS"). Accordingly, the interim report has been prepared in
accordance with the recognition and measurement criteria of IFRS. The financial
information contained in these interim financial statements has been prepared on
the basis of IFRS that the directors expect to be applicable as at 31 March
2008. The interim report has been drawn up using the accounting policies as set
out in note 2.
These are the group's first consolidated financial statements prepared in
accordance with IFRS. Certain optional exemptions to the general principles are
available under IFRS 1 and the significant first-time adoption choices made by
the group are as follows:
* The group has elected not to apply IFRS 3 retrospectively to business
combinations that took place before 1 April 2006 (the transition date). As a
result, in the IFRS opening balance sheet, goodwill arising from past business
combinations of �4.67m remains as stated under UK Generally Accepted Accounting
Principles ("UK GAAP").
* The cumulative adjustment to the foreign currency translation reserve
was set to zero at 1 April 2006.
Disclosures concerning the transition from UK GAAP to IFRS are presented in note
11.
The financial information for the six month period ending 30 September 2007 and
2006 has not been audited by the group's auditors and does not constitute
accounts within the meaning of s240 of the Companies Act 1985. The information
for the year ended 31 March 2007 does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. A copy of the statutory
accounts for that year has been delivered to the Registrar of Companies. The
auditors' report on those accounts was not qualified and did not contain
statements under section 237(2) or (3) of the Companies Act 1985.
2 ACCOUNTING POLICIES - CONSOLIDATED
Basis of consolidation
The consolidated financial information incorporates the financial information of
the company and entities controlled by the company (its subsidiaries). Control
is achieved where the company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits for its
activities. The financial statements of subsidiaries are included in the group
financial statements from the date the group obtained control until the group's
control ceases. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies in line with those
used by group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The acquiree's
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date, except for non-current assets (or disposal groups) that
are classified as held for resale in accordance with IFRS 5 "Non Current Assets
Held for Sale and Discontinued Operations, which are recognised and measured at
fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured
at cost, being the excess of the cost of the business combination over the
group's interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities recognised. If, after reassessment, the group's
interest in the net fair values of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised in the income statement immediately.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group's interest in the fair value of identifiable assets
and liabilities of a subsidiary at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an asset
is reviewed for impairment at least annually. Any impairment is recognised in
the income statement and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of any subsidiary the attributable amount of goodwill is included in
the determination of profit or loss on disposal.
Goodwill arising on business combinations before the date of transition to IFRS
has been retained at the value that would arise applying the principles of UK
GAAP.
Revenue and revenue recognition
Revenue represents amounts receivable for goods and services provided in the
normal course of business, net of trade discounts, VAT and other sales-related
taxes.
Revenue is recognised on despatch of the related goods. For revenue in respect
of research and development contracts, the revenue is recognised as it is earned
under the terms of the contract.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance lease are recognised as assets in the balance sheet at
their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a financial lease
obligation. Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges are charged directly
against income.
Rentals under operating leases are charged to the income statement on a
straight-line basis over the lease term.
Foreign currencies
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each group company are expressed in pound
sterling, which is the functional currency of the parent Company, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's functional currency (foreign currency) are
recorded at rates of exchange prevailing on the date of the transactions. At
each balance sheet date assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date.
Non monetary items are carried at their fair value and movements are included in
profit or loss for the period except for differences arising on retranslation of
no monetary items in respect of which gains and losses are recognised directly
in equity. For such non monetary items, any exchange component of that gain or
loss is recognised directly in equity.
Foreign currencies (continued)
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rate at the date of
transactions are used. Exchange rate differences arising, if any, are classified
as equity and transferred to the group's translation reserve. Such translation
differences are recognised as income or as expenses in the period to which the
operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Grants
Grants in respect of capital expenditure are credited to a deferred income
account and are released to the income statement over the expected useful lives
of the relevant assets. Grants of a revenue nature are credited to income in
the year to which they relate.
Operating profit
Operating profit is stated after charging provisions for impairment in
investment in associates, but before investment income and finance costs.
Retirement benefit costs
The group operates defined contribution pension schemes. Contributions are
charged to the profit and loss account as they become payable in accordance with
the rules of the scheme.
Taxation
The tax expense represents the sum of the tax currently payable, and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates and interests in joint
ventures, except where the group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the group intends to settle its current tax assets and liabilities on a net
basis.
Property, plant and equipment
Property, plant and equipment are held at cost less accumulated depreciation and
any recognised impairment loss. They are depreciated to their residual value
using the straight-line method over their expected useful lives as follows:
Freehold buildings - 2% - 4% straight-line
Fixtures, fittings and equipment - 10% - 33% straight-line
Motor vehicles - 25% straight-line
Assets held under finance leases are depreciated over their useful lives as set
out above.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sale proceeds and the carrying amount of the
asset, and is recognised in the income statement.
Development costs
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
An internally-generated intangible asset arising from the group's production
development is recognised only if the following conditions are met:
* an asset is created that can be identified;
* it is probable that the asset created will generate future economic
benefits; and
* the development cost of the asset can be measured reliably.
The cost of developing programmes not meeting the IAS 38 criteria are written
off to the income statement.
Separable intangibles
When an acquisition is made, a review is undertaken to identify separately
identifiable non-monetary assets that meet the definition under IAS 38 "
Intangible assets". In respect of acquisitions made in the period since
transition to IFRS, customer relationships, brand names, product rights and
know-how were recognised as being separately identifiable. The fair value was
determined on a basis that reflects the amounts the acquirer would have paid for
the assets in arms length transactions between knowledgeable willing parties.
Customer relationships are amortised over their estimated useful economic life
of 15 to 20 years. Brand names, product rights and know-how are amortised over
their estimated useful economic life of 10 years.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indications exist,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct material, labour costs and the appropriate share of production
overheads. Net realisable value represents the estimated selling price less all
estimated costs of completion.
Financial instruments
Financial assets and financial liabilities are recognised on the group's balance
sheet when the group becomes a party to the contractual provision of the
instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the income statement when there is objective evidence that the
asset is impaired. The allowance recognised is measured as the difference
between the asset's carrying amount and the present value of estimated future
cash flows discounted at the effective interest rate computed at initial
recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits held at call
with banks.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at an amortised cost using the effective interest rate method.
Equity instruments
Equity instruments issued by the company are recorded as proceeds received, net
of direct issue costs.
Provisions
Provisions are recognised when the group has a present obligation as a result of
a past event and it is probable that the group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date and are
discounted to present value where the effect is material.
Share-based payment
The group has applied the requirements of IFRS 2 to all grants of equity
instruments after 7 November 2002 that were unvested at 1 April 2006.
The group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured by use of the Black-Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.
Change in accounting policies
In the current financial year the group will adopt International Financial
Reporting Standard 7 "Financial instruments: Disclosures" IFRS 7 for the first
time. AS IFRS 7 is a disclosure standard, there is no impact on the change in
accounting policy on the half-yearly financial report. Full details of the
change will be disclosed in our annual report for the year ended 31 March 2008.
3 SEGMENTAL ANALYSIS OF RESULTS
For management purposes, the group is currently organised into three operating
divisions - Diagnostics, Healthcare and Enzymes. These divisions are the basis
on which the group reports its primary segment information. The Life Sciences
Division is not currently reported separately internally.
Principal activities are as follows
Diagnostics - specialising in the development and manufacture of colloidal gold,
and non-invasive lateral flow tests which can give a quick and effective
diagnosis to patients at the bedside or in a doctor's surgery without recourse
to costly and time-consuming laboratory analysis.
Healthcare - specialising in the sale and distribution of diabetes and
healthcare related products.
Enzymes - following the acquisition of Theratase, BBI is a world leader in
natural enzyme manufacture which significantly expands BBI's reagent capacity
across a broad range of diagnostics.
Segment information about these businesses is presented below.
Six Six Year
months months ended 31
ended 30 ended 30 March
September September 2007
2007 2006 �'000
�'000 �'000
Revenue
By business segment
Diagnostics 3,727 3,065 6,979
Healthcare 1,489 1,366 2,753
Enzymes 4,330 - -
Consolidated 9,546 4,431 9,732
By geographical destination
United Kingdom 3,990 1,728 4,027
Other European countries 1,702 753 1,809
North America 2,313 1,551 3,254
Rest of the world 1,541 399 642
Consolidated 9,546 4,431 9,732
By geographical origin
United Kingdom 6,996 4,409 9,458
North America 1,188 22 274
South Africa 1,362 - -
Consolidated 9,546 4,431 9,732
4 TAX
Income tax for the six month period is charged at 30.0% (six months ended 30
September 2006: 23.4%; year ended 31 March 2007: 27.1 %), representing the best
estimate of the average annual effective income tax rate expected for the full
year, applied to the pre-tax income of the six month period.
5 DIVIDENDS
On 31 May 2007 the Company paid a dividend of 0.5p per ordinary share in
existence prior to the acquisition of Theratase plc at a total cost of �134,000.
6 EARNINGS PER SHARE
Earnings per ordinary share has been calculated by dividing the profit after
taxation for the period by the average number of ordinary shares in issue during
the period of 38,706,153 (30 September 2006: 25,551,881; 31 March 2007:
26,145,391). The weighted average number of ordinary shares in issue during the
period excludes those held by employee benefit trusts which are deemed to be
cancelled on the basis that the right to dividends has been waived.
Diluted earnings per ordinary share has been calculated by dividing the profit
after taxation for the period by the average number of ordinary shares in issue
during the period after accounting for dilutive share options of 42,222,987 (30
September 2006: 33,306,258; 31 March 2007: 34,176,263).
7 BANK OVERDRAFTS AND LOANS
During the period, the group obtained new short-term bank loans amounting to
�3.723 million. The loans bear interest at market rates and are repayable
within 5 years. The proceeds were used to partly fund the acquisition of
Theratase and to refinance loans acquired with the business.
Repayments of bank loans amounting to �1.606 million were made during the
period. In addition the convertible loan of �7.5 million, included within
current liabilities as at 31 March 2007 was converted into equity during the
period.
8 SHARE CAPITAL
Share capital as at 30 September 2007 amounted to �1.073 million. During the
period, the group issued the following 2.5 pence ordinary shares: 10,596,104
shares in connection with the acquisition of Theratase; 5,208,333 shares in
connection with the conversion of the convertible loan; and 372,965 shares
following the exercise of share options.
9 ACQUISITION OF SUBSIDIARY
On 15 May 2007 the group acquired 100 per cent of the issued share capital of
Theratase plc ("Theratase") for cash and equity consideration of �24.1 million.
Theratase is the parent company of a group of companies involved in the
manufacture and supply of naturally derived enzymes. This transaction has been
accounted for by the purchase method of accounting.
Book value Fair value
�'000 �'000
Net assets acquired:
Intangible assets 1,934 11,707
Property, plant and equipment 1,841 1,841
Deferred tax asset 148 148
Investment 198 198
Inventories 2,505 2,505
Trade and other receivables 1,347 1,347
Cash and cash equivalents 2,028 2,028
Borrowings (1,254) (1,254)
Trade and other payables (2,305) (2,305)
Other creditors (819) (819)
Deferred tax liabilities (8) (2,940)
5,615 12,456
Goodwill 12,356
Total consideration 24,812
Satisfied by:
Cash 8,859
Equity 15,205
Expenses paid in cash 748
24,812
The goodwill arising on the acquisition of Theratase is attributable to the
anticipated profitability of the distribution of the group's products in new
markets and the anticipated future operating synergies from the combination.
The Theratase group contributed �4.33 million to revenue and �0.54 million to
the BBI group's profit before tax for the period between the date of acquisition
and 30 September 2007.
10 REPORT AND FINANCIAL STATEMENTS 2007
The comparative figures for the financial year ended 31 March 2007 are extracted
from the group's statutory financial statements for that financial year. Those
financial statements have been reported on by the group's auditors and delivered
to the Registrar of Companies. The report of the auditors was unqualified and
did not contain a statement under section 237 (2) or (3) of the Companies Act
1985.
Copies of the Annual Report for 2007 are available from the company's registered
office by applying to the Company Secretary, BBI Holdings Plc, Golden Gate, Ty
Glas Avenue, Llanishen, Cardiff, CF14 5DX.
The interim results for the six months ended 30 September 2007 and 30 September
2006 have been reviewed but have not been audited. The financial information
set out above does not constitute full financial statements as defined by
section 240 of the Companies Act 1985.
11 UK GAAP TO IFRS RECONCILIATION
As Employee As
published benefits restated
31 March �'000 under
2006 IFRS 31
�'000 March
2006
�'000
Assets
Non-current assets
Goodwill 4,666 - 4,666
Other intangible assets - - -
Property, plant and 1,472 - 1,472
equipment
Investments 293 - 293
Deferred tax asset 7 - 7
6,438 - 6,438
Current assets
Inventories 446 - 446
Trade and other 1,097 - 1,097
receivables
Cash and cash 1,452 - 1,452
equivalents
2,995 - 2,995
Total assets 9,433 - 9,433
Equity
Share capital 560 - 560
Share premium account 6,985 - 6,985
Foreign exchange - - -
reserve
Retained earnings (267) (15) (282)
Total equity 7,278 (15) 7,263
Liabilities
Non-current liabilities
Bank loans 965 - 965
Deferred tax - - -
liabilities
Long-term provisions 75 - 75
Total non current 1,040 - 1,040
liabilities
Current liabilities
Trade and other 581 15 596
payables
Current tax liabilities 232 - 232
Bank overdrafts and 302 - 302
loans
Provisions - - -
Total current 1,115 15 1,130
liabilities
Total liabilities 2,155 15 2,130
Total equity and 9,433 15 9,448
liabilities
Consolidated income statement for the six months ended 30 September 2006
As Employee Goodwill & Deferred As
published benefits intangibles tax restated
30 �'000 �'000 �'000 under
September IFRS 30
2006 September
�'000 2006
�'000
Revenue 4,431 - - - 4,431
Cost of sales (1,633) - - - (1,633)
Gross profit 2,798 - - - 2,798
Administration expenses (1,962) 22 - - (1,940)
Amortisation of intangible (207) - 148 - (59)
assets
Operating profit 629 22 148 - 799
Investment revenues 26 - - - 26
Finance costs (48) - - - (48)
Profit before tax 607 22 148 - 777
Tax (200) - - 18 (182)
Profit for the period 407 22 148 18 595
Comparative consolidated balance sheet as at 30 September 2006
As Employee Goodwill & Deferred As
published benefits intangibles tax restated
30 under
September �'000 �'000 �'000 IFRS 30
2006 September
2006
�'000 �'000
Assets
Non-current assets
Goodwill 8,053 - (1,961) 650 6,742
Other intangible assets - - 2,109 - 2,109
Property, plant and 1,637 - - - 1,637
equipment
Investments 702 - - - 702
Deferred tax asset 75 - - - 75
10,467 - 148 650 11,265
Current assets
Inventories 486 - - - 486
Trade and other 1,806 - - - 1,806
receivables
Cash and cash 2,092 - - - 2,092
equivalents
4,384 - - - 4,384
Total assets 14,851 - 148 650 15,649
Equity
Share capital 669 - - - 669
Share premium account 10,808 - - - 10,808
Foreign exchange - - - - -
reserve
Retained earnings 77 7 148 18 250
Total equity 11,554 7 148 18 11,727
Liabilities
Non-current liabilities
Bank loans 825 - - - 825
Deferred tax 79 - - 632 711
liabilities
Long-term provisions 538 - - - 538
Total non current 1,442 - - 632 2,074
liabilities
Current liabilities
Trade and other 726 (7) - - 719
payables
Current tax liabilities 578 - - - 578
Bank overdrafts and 417 - - - 417
loans
Dividends 134 - - - 134
Provisions - - - - -
Total current 1,855 (7) - - 1,848
liabilities
Total liabilities 3,297 (7) - 632 3,922
Total equity and 14,851 - 148 650 15,649
liabilities
Consolidated income statement for the year ended 31 March 2007
As Employee Foreign Goodwill & IAS 38 Deferred As
published benefits exchange intangibles start-up tax restated
31 March �'000 �'000 �'000 costs �'000 under
2007 �'000 IFRS 31
�'000 March
2007
�'000
Revenue 9,732 - - - - 9,732
Cost of sales (3,345) - - - (83) - (3,428)
Gross profit 6,387 - - - (83) - 6,304
Administration (4,048) (13) 58 - - - (4,003)
expenses
Amortisation of (450) - - 287 - - (163)
intangible assets
Operating profit 1,889 (13) 58 287 (83) - 2,138
Investment revenues 33 - - - - - 33
Finance costs (92) - (58) - - - (150)
Profit before tax 1,830 (13) - 287 (83) - 2,021
Tax (597) - - - - 49 (548)
Profit for the 1,233 (13) - 287 (83) 49 1,473
period
Comparative consolidated balance sheet as at 31 March 2007
As Employee Goodwill IAS 38 Deferred As
published benefits and start-up tax restated
31 March �'000 intangibles costs �'000 under
2007 �'000 �'000 IFRS 31
�'000 March
2007
�'000
Assets
Non-current assets
Goodwill 9,753 - (3,175) - 1,087 7,665
Other intangible assets - - 3,462 - - 3,462
Property, plant and 1,904 - - - - 1,904
equipment
Investments 784 - - - - 784
Deferred tax asset 51 - - - - 51
12,492 - 287 - 1,087 13,886
Current assets
Inventories 583 - - - - 583
Trade and other 2,883 - - (83) - 2,800
receivables
Current asset 7,500 - - - - 7,500
investment
Cash and cash 1,490 - - - - 1,490
equivalents
12,456 - - (83) - 12,373
Total assets 24,948 - 287 (83) 1,087 26,239
Equity
Share capital 669 - - - - 669
Share premium account 10,793 - - - - 10,793
Translation reserves - - - - - -
Retained earnings 984 (28) 287 (83) 49 1,209
Total equity 12,446 (28) 287 (83) 49 12,671
Liabilities
Non-current liabilities
Bank loans 1,670 - - - - 1,670
Deferred tax - - - - 1,038 1,038
liabilities
Long-term provisions 956 - - - - 956
Total non current 2,626 - - - 1,038 3,664
liabilities
Current liabilities
Trade and other 952 28 - - - 980
payables
Current tax liabilities 800 - - - - 800
Bank overdrafts and 624 - - - - 624
loans
Convertible loan stock 7,500 - - - - 7,500
Provisions - - - - - -
Total current 9,876 28 - - - 9,904
liabilities
Total liabilities 12,502 28 - - 1,038 13,568
Total equity and 24,948 - 287 (83) 1,087 26,239
liabilities
Principal areas of impact
Employee benefits
In accordance with IAS 19: "Employee benefits" a holiday pay accrual has been
recognised.
Goodwill and intangibles
In accordance with IFRS 3: "Business combinations", some amounts previously
classified as goodwill have been reclassified as other intangible assets.
Goodwill is no longer amortised. Other intangible assets are amortised over
their expected useful lives.
Start up costs
In accordance with IAS 38: "Intangible assets" amounts previously capitalised as
start up costs have been written off in the period they were incurred.
Deferred tax
A deferred tax liability has been recognised in respect of the intangible assets
arising on business combinations.
Reclassifications
In addition to the above adjustments which impact on total equity, a number of
reclassifications have been made to meet the presentational requirements under
IFRS. These include:
* the creation of a foreign exchange translation reserve for gains and
losses arising after 1 April 2006;
* the transfer of onerous lease accruals to provisions; and
* the transfer of day-to-day foreign exchange gains and losses to
financial income or expenses within the income statement.
INDEPENDENT REVIEW REPORT TO BBI HOLDINGS PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007 which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated statement of recognised income and
expense, the consolidated statement of changes in equity, the consolidated cash
flow statement and related notes 1 to 11. We have read the other information
contained in the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company, for our
review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRS as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report have been prepared in accordance with the accounting policies the group
intends to use in preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with the AIM Rules of the London Stock
Exchange.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
Cardiff, United Kingdom
11 December 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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