RNS Number:4099U
Bespak PLC
20 January 2004
For Immediate Release 20 January 2004
Bespak plc
Interim Results for the 26 weeks to 1 November 2003
Bespak plc (LSE: BPK), an innovator in drug delivery, today announces its
interim results for the 26 weeks to 1 November 2003 (2002: 26 weeks to 1
November 2002).
KEY POINTS
* Recovery from prior year in line with plan, showing strong volume growth of
HFA valves and Device & Manufacturing Services (DMS) products
* Sales of products and services decreased 4% to #39.9m (2002: #41.4m) and,
including sales of tooling and equipment, turnover decreased 9% to #40.4m
(2002: #44.2m re-presented)
* Group operating profit before exceptional items increased 43% to #5.0m
(2002: #3.5m).
* Profit before tax and exceptional items increased 24% to #5.1m (2002:
#4.1m) and, after exceptional costs of #2.0m arising from the continuing
restructuring (2002: #1.5m exceptional gain), profit before tax decreased 45%
to #3.1m (2002: #5.6m)
* Earnings per share before exceptional items increased 20% to 13.7p (2002:
11.4p) and, after exceptional items, declined 52% to 8.1p (2002: 17.0p)
* Interim dividend of 7.0p maintained (2002: 7.0p)
* Balance sheet remains strong - net cash of #8.4m
* John Robinson today appointed as Chairman to replace Sir David Cooksey - see
separate release.
Mark Throdahl, Chief Executive of Bespak, commented:
"Last summer we said that we would return Bespak to previous levels of
performance and that we were encouraged by the strong fundamentals in our
businesses. Since that time the Company's recovery has continued in line with
our plan. Implementation of the restructuring programme is expected to be
completed this financial year and we expect to benefit from the full year impact
of these cost savings next financial year. Finally, we are delighted to welcome
John Robinson as Chairman of the Board."
For further information please call:
Bespak plc
Mark Throdahl - Chief Executive On 20.01.04: +44 (0) 20 7466 5000
Martin Hopcroft - Group Finance Director Thereafter: +44 (0) 20 1908 552 600
Buchanan Communications +44 (0) 20 7466 5000
Tim Thompson/Mark Court/ Mary-Jane Johnson
Bespak plc
Interim Results for the 26 weeks to 1 November 2003
Summary
During the first half, Bespak's financial performance was in line with plan as a
result of significant cost reduction measures, solid trading in Respiratory and
exceptional volumes in Device & Manufacturing Services. Implementation of the
restructuring programme announced in April has proceeded on schedule and is
expected to generate previously indicated annualised savings, which will be
fully reflected in our next financial year. The Group's overall performance
continues in line with the Board's expectations.
Sales of products and services decreased 4% to #39.9m (2002: #41.4m) and,
including sales of tooling and equipment, turnover decreased 9% to #40.4m (2002:
#44.2m re-presented). Group operating profit before exceptional items increased
43% to #5.0m (2002: #3.5m). Expenses were controlled well in the first half and
the Group's operating profit margin before exceptional items increased to 12.4%
(2002: 7.9%). Profit before tax and exceptional items increased 24% to #5.1m
(2002: #4.1m) and, after exceptional costs of #2.0m arising from the continuing
restructuring (2002: #1.5m exceptional gain), profit before tax decreased 45% to
#3.1m (2002: #5.6m). Earnings per share before exceptional items increased 20%
to 13.7p (2002: 11.4p) and, after exceptional items, declined 52% to 8.1p (2002:
17.0p).
The Board is maintaining an interim dividend of 7.0 pence per share, which is
payable on 20 February 2004 to those on the shareholder register on 30 January
2004.
Net cash was #8.4m as at 1 November 2003, exceeding expectations due to lower
than budgeted capital expenditure and better than expected working capital
movements.
Operational Review
Respiratory Drug Delivery
Respiratory sales, comprising metered dose inhaler valves, actuators, medical
check valves and nasal delivery devices, equalled last year's level of #17.7m.
We experienced strong HFA growth to European customers, offset by decreased
sales of CFC valves.
Bespak's valves for use with environmentally friendly HFA propellants are
replacing CFC-based formulations in Europe. For the time being, no such trend
is evident in the US, which remains predominantly a CFC market. Our 357 and
Easifill HFA valves are under active consideration by a number of current and
prospective customers, and Bespak believes it has won the valve contracts for
nearly two-thirds of the HFA formulations approved around the world. HFA sales
were 37% of valve sales whereas, in the comparable period last year, HFA sales
were 21% of valve sales.
In November, we formally opened our new valve manufacturing plant in King's
Lynn. This #10m facility offers our customers the latest valve moulding and
assembly infrastructure and provides us with highly efficient manufacturing
capacity for future market share growth. During the past five years we have
committed over #55m of capital expenditure to the expansion and renewal of our
manufacturing facilities, culminating in completion of the King's Lynn valve
plant. We are achieving productivity improvements from this investment.
Devices & Manufacturing Services (DMS)
This business provides a comprehensive range of device-related services to
pharmaceutical and drug delivery companies. Sales decreased 3% to #19.4m (2002:
#20.1m). This reflects lower pricing on our lead contract manufactured product
partly offset by exceptional volume growth. Additionally, we enjoyed
significant sales to Abbott Laboratories on a product begun a year ago.
Over the last six months, DMS has achieved its cost reduction and throughput
goals for its largest product, and expected gross margins are now being
achieved.
Working in close collaboration with Nektar Therapeutics of San Carlos,
California, we have finalised the manufacturing process for the inhaler device
that will deliver the world's first inhaled insulin. This exciting new product,
Exubera(R), should benefit millions of diabetic patients around the world.
Nektar is in a collaboration with Pfizer Inc. to develop the inhalation device
and formulation process for Exubera(R). Pfizer has also entered into an
agreement with Aventis to co-develop, co-promote and co-manufacture Exubera(R).
In October, we announced a collaboration with Britannia Pharmaceuticals to
develop a novel clinical approach to prevent the formation of surgical
adhesions; post-surgical scar tissue that in the US alone requires nearly $2
billion in hospital and surgical costs to correct. Under the terms of a
development agreement, Bespak will develop at its own expense the delivery
device for Britannia's AdSurf(R), which is now in Phase III clinical trials. We
will together seek a licensing partner to manage world-wide sales of the
product, and Bespak and Britannia will share in royalties from Adsurf(R) sales
and milestone payments.
We also entered into a development agreement on IntrajectTM with Aradigm, the
drug delivery company in Hayward, California which acquired the needle-free
injector technology from Weston Medical last year. Bespak was Weston Medical's
development partner prior to the sale
Consumer Dispensers
This business manufactures pumps for consumer household products, toiletries and
fragrances. As a result of weak demand from a number of customers, sales
declined 22% to #2.8m (2002: #3.7m). Development of a new proprietary spray pump
is now entering its final stage and we plan to launch this product in the Spring
together with other product line extensions.
Cost Saving Programmes
In April, we announced a series of significant actions to reduce our cost base
and return the Group to previous levels of performance. We are now confident
that these programmes will generate targeted full year savings, which will be
fully reflected in our performance in the next financial year.
There have been three elements of cost-saving. First, in April last year we
curtailed Nasal formulation development programmes, which were meeting technical
milestones but could not provide short-term financial returns. Second, in June
we removed 25 positions in North America with the objective of eliminating
long-running losses. Third, we identified 105 positions to be eliminated from UK
operations. Most of these positions were removed in July and November, with the
remainder going this month.
New Chairman
Sir David Cooksey has been a director of Bespak for ten years and has served as
Chairman for the past eight years. It is with deep appreciation that we bid him
farewell after a long and fruitful association with our Company.
Sir David will step down as Chairman from the Board of Bespak today and we are
delighted to announce the appointment of John Robinson as the new Chairman of
the Company. From 1990 to 1997 John was Chief Executive of Smith & Nephew plc,
the largest UK-based medical technology company. He was subsequently Chairman
until 2000. John is Chairman of George Wimpey plc, Paragon Healthcare Group and
Chairman and Pro-Chancellor of the University of Hull. He will bring
outstanding industry experience and stature to our Company.
Outlook
In Respiratory, we expect that a reduction in CFC valve sales will be offset by
the continuing growth of HFA valve sales. While we anticipate CFC demand to
continue for some years in the US, we cannot forecast precisely its duration or
level.
In the second half, the DMS business will continue to benefit from exceptional
volumes of its lead product. However, it is not anticipated that volumes of
this product will be maintained in the following year. We remain optimistic
about the prospects for the Exubera(R) inhaler device, although we cannot
predict when full-scale production will commence.
We are confident that our Consumer Dispensers business will benefit next
financial year from the introduction of a new proprietary spray pump and other
product line extensions.
Implementation of the restructuring programmes will be completed this financial
year so that we will benefit from full year cost savings next financial year.
With completion of the King's Lynn valve plant, capital spending will be
substantially reduced.
Around 10% of the Group's sales from the UK are denominated in US dollars.
Therefore, continuing weakness of the US dollar will impact our performance next
financial year, subject to compensatory actions.
Having achieved performance in line with our plan in the first half, we are
looking forward to driving our business forward with continuing profit
improvement.
Mark C. Throdahl
Chief Executive
19 January 2004
Consolidated Profit and Loss Account
Unaudited Unaudited Unaudited Unaudited Audited
26 weeks to 26 weeks to 26 weeks to 26 weeks to 52 weeks to
1 November 1 November 1 November 1 November 3 May
2003 2003 2003 2002 2003
Before Exceptional Total Total Total
exceptional items Re-presented
items (Note 1)
Note #000 #000 #000 #000 #000
Sales of products and 39,931 - 39,931 41,397 79,887
services
Sales of tooling and 428 - 428 2,814 8,423
equipment
Turnover 2 40,359 - 40,359 44,211 88,310
Operating expenses 3 (35,361) (2,029) (37,390) (40,724) (87,180)
Group operating profit 2 4,998 (2,029) 2,969 3,487 1,130
Share of joint ventures and (69) - (69) 367 325
associates
Total operating profit 4,929 (2,029) 2,900 3,854 1,455
Profit on sale of associate 3 - - - 1,502 1,439
Net interest receivable 4 191 - 191 285 391
Profit on ordinary 5,120 (2,029) 3,091 5,641 3,285
activities before taxation
Taxation 5 (1,477) 525 (952) (1,118) (499)
Profit for the financial 3,643 (1,504) 2,139 4,523 2,786
period
Dividends (1,866) (1,859) (5,071)
Retained profit/(loss) 273 2,664 (2,285)
Basic and diluted earnings 6 13.7p 11.4p 11.5p
per share before exceptional
items (pence)
Basic and diluted (loss)/ 6 (5.6p) 5.6p (1.0p)
earnings per share on
exceptional items (pence)
Basic and diluted earnings 6 8.1p 17.0p 10.5p
per share (pence)
Dividends per share (pence) 7 7.0p 7.0p 19.1p
Operating expenses for the 52 weeks to 3 May 2003 include #2,365,000 for
exceptional charges (see note 3).
Consolidated Balance Sheet
Unaudited Unaudited Audited
1 November 1 November 3 May
2003 2002 2003
Note #000 #000 #000
Fixed assets
Intangible assets - 540 -
Tangible assets 63,219 62,273 64,132
Investments 1,276 1,631 1,397
64,495 64,444 65,529
Current assets
Stocks 4,684 3,729 3,514
Debtors 11,821 11,904 12,729
Short-term investments 16,743 22,206 16,365
Cash at bank and in hand 928 1,929 1,678
34,176 39,768 34,286
Creditors: Amounts falling due within one year 8 (24,627) (26,252) (25,786)
Net current assets 9,549 13,516 8,500
Total assets less current liabilities 74,044 77,960 74,029
Creditors: Amounts falling due after more than one year 8 (795) - (731)
Provisions for liabilities and charges 9 (6,061) (5,889) (6,265)
Net assets 67,188 72,071 67,033
Capital and reserves
Called up share capital 2,681 2,679 2,679
Share premium account 23,054 23,010 23,010
Profit and loss account 41,453 46,382 41,344
Equity shareholders' funds 67,188 72,071 67,033
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
Note #000 #000 #000
Net cash inflow/(outflow) from operating activities 10 5,668 (325) 2,975
Dividends received from associates - - 9
Returns on investment and servicing of finance
Interest received 318 556 866
Interest paid (144) (255) (443)
174 301 423
Taxation
UK corporation tax (322) (1,495) (2,088)
Overseas tax (26) 14 41
(348) (1,481) (2,047)
Capital expenditure and financial instruments
Payments to acquire intangible fixed assets - (133) (70)
Payments to acquire tangible fixed assets (3,430) (8,459) (15,703)
Receipts from sales of tangible fixed assets 33 542 597
(3,397) (8,050) (15,176)
Acquisitions and disposals
Purchase of fixed asset investments (39) (61) (122)
Receipts from sale of associate - 2,440 2,379
(39) 2,379 2,257
Equity dividends paid (3,214) (3,212) (5,070)
Net cash outflow before management of liquid resources and (1,156) (10,388) (16,629)
financing
Management of liquid resources
(Decrease)/increase in short-term investments (378) 9,267 15,108
Financing
Payment for shares 289 22 22
Net decrease in loans (1,840) (1,995) (1,971)
Net cash outflow from financing (1,551) (1,973) (1,949)
Decrease in net cash (3,085) (3,094) (3,470)
Statement of Total Recognised Gains and Losses
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Profit for the financial period 2,139 4,523 2,786
Exchange movements on foreign currency net investments (164) (318) (415)
Total recognised gains and losses for the period 1,975 4,205 2,371
Reconciliation of Movements in Equity Shareholders' Funds
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Equity shareholders' funds brought forward 67,033 69,703 69,703
Profit for the financial period 2,139 4,523 2,786
Dividends (1,866) (1,859) (5,071)
Exchange movements on foreign currency net investments (164) (318) (415)
Movement relating to QUEST - - 8
Issue of ordinary share capital 46 22 22
Equity shareholders' funds carried forward 67,188 72,071 67,033
Notes to the Accounts
1. Basis of preparation and accounting policies
The unaudited results for the 26 weeks to 1 November 2003 have been prepared in
accordance with UK Generally Accepted Accounting Principles. The accounting
policies applied are those set out in the Group's Annual Report and Accounts for
the 52 weeks to 3 May 2003.
In accordance with the change in accounting policy for turnover that was
implemented for the 52 weeks to 3 May 2003, turnover for the 26 weeks to 1
November 2002 has been re-presented on the same basis to include sales of
tooling and equipment within turnover and related costs within operating
expenses. The effect on the comparative 26 weeks to 1 November 2002 is to
increase turnover and operating expenses by #2,814,000. This reclassification
does not affect the operating profit or net assets.
The charge for taxation on the profits for the 26 weeks to 1 November 2003 has
been calculated by reference to the estimated effective tax rate for the 52
weeks to 1 May 2004.
The consolidated profit and loss account and consolidated cash flow statement
for the 52 weeks to, and the balance sheet at, 3 May 2003 are an abridged
statement of the full Group Accounts for that period which have been delivered
to the Registrar of Companies. The report of the Auditors on the Accounts for
the 52 weeks to 3 May 2003 was unqualified and did not contain a statement under
either section 237(2) or section 237(3) of the Companies Act 1985.
2. Segmental information
26 weeks to 26 weeks to 52 weeks to
Turnover by business 1 November 1 November 3 May
2003 2002 2003
Re-presented
(Note 1)
#000 #000 #000
Respiratory 17,651 17,622 35,409
Device & Manufacturing Services 19,449 20,123 37,751
Consumer Dispensers 2,831 3,652 6,727
Sales of products and services 39,931 41,397 79,887
Sales of tooling and equipment 428 2,814 8,423
40,359 44,211 88,310
26 weeks to 26 weeks to 52 weeks to
Turnover by destination 1 November 1 November 3 May
2003 2002 2003
Re-presented
(Note 1)
#000 #000 #000
United Kingdom 16,748 20,166 37,017
United States of America 12,025 14,776 31,184
Europe 8,581 5,449 12,664
Rest of the World 3,005 3,820 7,445
40,359 44,211 88,310
Notes to the Accounts
2. Segmental information (continued)
26 weeks to 26 weeks to 52 weeks to
Turnover by origin 1 November 1 November 3 May
2003 2002 2003
Re-presented
(Note 1)
#000 #000 #000
United Kingdom 35,334 39,011 78,224
United States of America 7,987 10,953 22,254
Total sales 43,321 49,964 100,478
Intra-group sales (2,962) (5,753) (12,168)
40,359 44,211 88,310
26 weeks to 26 weeks to 52 weeks to
Group operating profit by origin 1 November 1 November 3 May
2003 2002 2003
Re-presented
(Note 1)
#000 #000 #000
United Kingdom
Group operating profit before exceptional operating expenses 5,489 3,502 4,058
Exceptional operating expenses (1,749) - (2,208)
3,740 3,502 1,850
United States of America
Group operating loss before exceptional operating expenses (491) (15) (563)
Exceptional operating expenses (280) - (157)
(771) (15) (720)
Group
Group operating profit before exceptional operating expenses 4,998 3,487 3,495
Exceptional operating expenses (2,029) - (2,365)
2,969 3,487 1,130
1 November 1 November 3 May
Net assets by origin 2003 2002 2003
#000 #000 #000
United Kingdom 55,935 52,542 51,293
United States of America 10,677 12,613 15,745
Allocated net assets 66,612 65,155 67,038
Unallocated net assets/(liabilities) 576 6,916 (5)
67,188 72,071 67,033
Average rate of exchange #1 Sterling : US $ 1.63 1.52 1.56
Closing rate of exchange #1 Sterling : US $ 1.69 1.56 1.60
3. Exceptional items
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Exceptional operating expenses (2,029) - (2,365)
Profit on sale of associate - 1,502 1,439
Exceptional items before taxation (2,029) 1,502 (926)
Taxation 525 - 648
Exceptional items after taxation (1,504) 1,502 (278)
The exceptional operating expenses comprise employee severance costs,
curtailment of nasal formulation activities, and costs incurred with the profit
forecast and bid approaches.
Notes to the Accounts
4. Net interest receivable
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Interest receivable
Interest receivable on deposits 284 537 842
Interest receivable other - - 29
Associates 1 - -
285 537 871
Interest payable
Bank overdrafts and loans (94) (239) (469)
Associates - (13) (11)
(94) (252) (480)
Net interest receivable 191 285 391
5. Taxation
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Current taxation 1,112 791 6
Deferred taxation (140) 166 327
Share of taxation of associates (20) 161 166
952 1,118 499
6. Earnings per share
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
Profit for the financial period before exceptional items (#000) 3,643 3,021 3,064
Exceptional items after taxation (#000) (Note 3) (1,504) 1,502 (278)
Profit for the financial period (#000) 2,139 4,523 2,786
Weighted average number of shares in issue 26,802,153 26,789,515 26,790,505
Shares owned by Employee Share Ownership Trusts (238,936) (249,466) (245,793)
Average number of shares in issue for basic earnings 26,563,217 26,540,049 26,544,712
Dilutive impact of share options outstanding 95 124,709 95
Diluted average number of shares in issue 26,563,312 26,664,758 26,544,807
Basic and diluted earnings per share before exceptional items 13.7 11.4 11.5
(pence)
Basic and diluted (loss)/earnings per share on exceptional items (5.6) 5.6 (1.0)
(pence)
Basic and diluted earnings per share (pence) 8.1 17.0 10.5
7. Dividends
The interim dividend of 7.0p (2002: 7.0p) will be paid on 20 February 2004 to
shareholders on the register on 30 January 2004.
Notes to the Accounts
8. Creditors
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Amounts falling due within one year
Loans falling due within one year - 1,945 1,873
Bank overdrafts & loans - unsecured 9,279 7,406 7,350
Proposed dividend 1,864 1,858 3,212
Corporate taxation 1,181 1,870 761
Other creditors 12,303 13,173 12,590
24,627 26,252 25,786
Amounts falling due after more than one year
Other creditors 795 - 731
795 - 731
9. Provisions for liabilities and charges
Deferred Post Total
taxation retirement
benefits
#000 #000 #000
At 4 May 2003 5,727 538 6,265
Profit and loss account (140) (47) (187)
Exchange rate adjustments - (17) (17)
At 1 November 2003 5,587 474 6,061
10. Cash flow from operating activities
26 weeks to 26 weeks to 52 weeks to
1 November 1 November 3 May
2003 2002 2003
#000 #000 #000
Group operating profit 2,969 3,487 1,130
Depreciation 3,743 3,516 7,116
Amortisation of intangible fixed assets - 30 507
(Decrease)/increase in amount provided against investment in own (197) 128 264
shares
Amount provided on revaluation of fixed asset investment - - 78
(Profit)/loss on sale of tangible fixed assets (11) 155 484
Profit on sale of fixed asset investment (83) - -
Increase in stocks (1,216) (386) (187)
Decrease/(increase) in debtors 650 (1,932) (2,655)
Decrease in creditors (140) (5,337) (3,998)
(Decrease)/increase in provisions (47) 14 236
Net cash inflow/(outflow) from operating activities 5,668 (325) 2,975
Operating cash flow in the 26 weeks to 1 November 2003 includes an outflow of
#1,775,000 relating to exceptional operating expenses in the 26 weeks to 1
November 2003 and an outflow of #1,195,000 relating to exceptional operating
expenses in the 52 weeks to 3 May 2003.
Operating cash flow in the 52 weeks to 3 May 2003 includes an outflow of
#725,000 relating to exceptional operating expenses in the 52 weeks to 3 May
2003.
Notes to the Accounts
11. Reconciliation of net cash flow to movement in net funds
4 May Cash Exchange 1 November
2003 flow Movements 2003
#000 #000 #000 #000
Cash at bank and in hand 1,678 (736) (14) 928
Overdrafts and short-term loans (7,350) (2,349) 420 (9,279)
Net overdrafts and short-term loans (5,672) (3,085) 406 (8,351)
Loans and leasing obligations (1,873) 1,840 33 -
Short-term investments 16,365 378 - 16,743
Net funds 8,820 (867) 439 8,392
Financing items included in cash flow movements
Payment for shares (289)
Net cash outflow before management of liquid
resources and financing
(1,156)
This information is provided by RNS
The company news service from the London Stock Exchange
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