31st March 2005
TEPNEL LIFE SCIENCES PLC ("the Company", AIM:TED)
www.tepnel.com
Tepnel's preliminary results for the year ended 31st December 2004
Tepnel Life Sciences provides research products and services to the fast
growing pharmaceutical and biotechnology markets and provides molecular
diagnostic products and services
Highlights
* Completion of Tepnel Lifecodes acquisition at a favourable price
* Increase in annual sales from �3.9 million (2003) to �10.2 million (2004)
* Reduction in annual operating losses (pre-exceptional items) from �2.17
million (2003) to �1.73 million
* Secured new equity funding of �4.2 million (before expenses)
* Completion of Diaclone acquisition
Chairman's Statement
2004 was a year of significant change and growth for Tepnel, with the
completion of two international acquisitions, Tepnel Lifecodes Corporation
(formerly Orchid Diagnostics) in January and Diaclone Research SAS in December.
These marked the Group's entrance into the strategically important markets of
molecular diagnostics and monoclonal antibody development and production.
The acquisition of Tepnel Lifecodes based in Stamford, Connecticut USA, was
completed in January 2004 for an initial consideration of $3.45m. Following a
review of the completion accounts, the consideration was revised downwards to
$2.49m. We are pleased to report that this important new addition to our Group
performed in line with management's expectations for the year under review. A
rapid integration of the business has allowed us to commence the sale and
distribution of our existing Tepnel DNA purification products and Tepnel
Biosystems food safety tests into continental USA.
Tepnel's second acquisition in 2004 was Diaclone Research SAS in December for a
consideration of Euro2.37 million. The company, located in Besancon, France,
produces monoclonal antibodies for in vitro studies and diagnostic purposes.
Diaclone has strong historical relationships with several major pharmaceutical
companies and this is expected to create cross-selling opportunities for both
our TSS Division and for Diaclone to build incremental revenues in the future.
Tepnel also secured significant new funding in 2004. A successful round of �
4.2m (before expenses) in November was used to raise the funds required for the
acquisition of Diaclone Research SAS. In addition the funds will be used for
the construction of a biopharmaceutical facility for the Tepnel Scientific
Services business in Livingston, Scotland. The Company also issued 74.4 million
warrants to subscribe for shares at 6.98 pence per share and raised �0.6
million of equity funding at the beginning of the year through Cornell Capital
Partners Offshore L.P.
Poor progress in sales of our Nucleoplex and Nucleopure systems during the year
was a major disappointment. The Board has decided that these products would
have a better chance of success with a specialist instrument business and we
are actively searching for appropriate opportunities to sell the instruments
operation to such a company. Alternatively we may choose a partner through whom
we would retain the right to sell reagents to end-users. The Group has since
the year-end ceased the research, development, sales and marketing activities
associated with these two projects and the benefits of this decision are
expected to contribute positively to our financial results in 2005.
Financial results
Turnover for the twelve months ended 31st December 2004 reached �10.2 million
from �5.7 million in the 18 months to 31st December 2003. Turnover in the
calendar year 2004 from activities owned in 2003, grew 4.5% to �4.04 million
(2003 - �3.87 million). Turnover from acquisitions in the year contributed �
6.15 million (2003: � nil)
Operating losses for the twelve months were �2.28 million (2003 18 months: �
5.94 million) after taking account of exceptional items totalling �0.55 million
(2003 18 months: �2.35 million). An exceptional loss was recognised in the
following area during the final six months of the year:
* The lack of progress in sales of the Nucleoplex and Nucleopure instruments
systems has resulted in cessation of continued research, development, sales
and marketing activities associated with these products. The Company has
provided at year-end a total of �547,000, comprising �506,000 for
write-down of stocks of these two instruments systems and �41,000 for
redundancy costs for people employed directly or indirectly on these
projects.
Operating losses pre-exceptional items in calendar year 2004, from activities
owned in 2003, were �1.64 million, a reduction of 24.3% from the calendar year
2003 loss of �2.17 million. Acquisitions during the year made an operating loss
of �0.09 million (2003: �nil)
The basic loss per share for the year was 1.5 pence (2003 18 months: 5.6
pence).
Following the completion of the acquisition of Diaclone Research, cash balances
at 31st December 2004 amounted to �2.54 million. Net assets at year-end
totalled � 7.56 million (2003: � 5.90 million)
Overall, during the last year for Tepnel has once again demonstrated increased
sales and increased gross profits. In addition, losses before interest, tax and
exceptional items were reduced.
Board additions
Dr. Andrew Clark joined the Company as Non-Executive Director in May and brings
a wealth of experience to the Company. Andrew acts as a consultant for
Reabourne Technology Investment Management Ltd, which he co-founded in 1995.
Prior to this role he held several positions including UK and European
Biotechnology Analyst at Barings.
Post balance-sheet events
Our new subsidiary in France began the year well by securing a valuable
comprehensive research collaboration with Boehringer Ingelheim of Germany to
develop antibodies for research and possibly for therapeutic use. Under the
terms of the agreement Diaclone will generate murine monoclonal antibodies that
recognise human immune regulatory cells. The terms of the collaboration also
allow Tepnel to market for research and diagnostic applications those
monoclonal antibodies generated by Diaclone which are not developed for
therapeutic indications by Boehringer Ingelheim.
Future Prospects
Following the acquisition of Diaclone Research SAS in December 2004, our
businesses have been restructured into two divisions:
* Research Products and Services; and
* Molecular Diagnostics.
The Molecular Diagnostics division comprises the Tepnel Lifecodes and Tepnel
Diagnostics businesses acquired from Orchid Biosciences in January 2004,
whereas the Research Products and Services division comprises all our other
activities including the newly acquired Diaclone Research SAS.
These two divisions and their related markets we believe offer excellent growth
prospects. Resources for organic growth and further strategic M&A will be
directed towards these markets.
All of our UK companies, with the exception of Tepnel Life Sciences plc, traded
profitably during 2004. Certain ongoing annual payroll costs estimated to be
around �250,000 associated with the instrument side of Tepnel Life Sciences plc
have now been eliminated. This is expected to have a positive impact on
financial results for the year ended 31st December 2005.
Acquisitions during the year, whilst loss-making, are expected to achieve
operating profitability in 2005.
The key objective for the Tepnel Group is to reach sustainable profitability at
the earliest opportunity. Both of the new divisions and their constituent parts
are committed to further improvements in financial performance in 2005.
Current Trading
Tepnel has made a solid start to the year. The Board is confident of reporting
further progress towards profitability in 2005.
Alec Craig
Non-Executive Chairman
31st March 2005
References to the figures for the calendar year ended 31 December 2003 are
contained within note 6.
Consolidated Profit & Loss account for the year ended 31 December 2004
Unaudited Audited
Continuing Activities Consolidated
Acquisitions Year ended 18 Months
31 ended
December 31
2004 December
2003
Notes
�'000 �'000 �'000 �'000
Turnover 1 6,149 4,044 10,193 5,676
Cost of sales (3,687) (1,780) (5,467) (3,041)
Gross profit 2,462 2,264 4,726 2,635
Other administrative (443) (2,279) (2,722) (3,320)
expenses
Exceptional items 2 - (547) (547) (2,348)
Total administrative (443) (2,826) (3,269) (5,668)
expenses
Sales and marketing (1,293) (892) (2,185) (1,295)
Research and development (820) (733) (1,553) (1,613)
Total expenses (2,556) (4,451) (7,007) (8,576)
Operating loss (94) (2,187) (2,281) (5,941)
Bank interest receivable 43 100
Interest payable (23) (41)
Loss on ordinary (2,261) (5,882)
activities before taxation
Taxation on loss on 19 221
ordinary activities
Loss on ordinary (2,242) (5,661)
activities after taxation
Basic loss per share 5 1.5p 5.6p
Diluted loss per share 5 1.5p 5.6p
Consolidated Balance Sheet as at 31 December 2004
Unaudited Audited
Notes 31 31
December December
2004 2003
�'000 �'000
Fixed assets
Intangible 1,882 -
Tangible 1,851 1,171
3,733 1,171
Current assets
Stocks 2,279 995
Debtors 2,932 1,481
Cash at bank and in hand 2,542 4,244
7,753 6,720
Creditors: amounts falling (3,927) (1,859)
due within one year
Net current assets 3,826 4,861
Total assets less current 7,559 6,032
liabilities
Creditors: amounts falling - (137)
due after more than one
year
Net Assets 7,559 5,895
Represented by:
Called up share capital 2,129 1,337
Share premium 33,588 30,438
Profit and loss account (28,158) (25,880)
4 7,559 5,895
Consolidated Statement of Total Recognised Gains and Losses
Unaudited Audited
Year ended 18 months
31 December ended 31
2004 December 2003
�'000 �'000
Loss for the period (2,242) (5,661)
Currency translation differences on (36) -
foreign currency net investments
Total losses recognised (2,278) (5,661)
Consolidated Cash Flow Statement for the year ended
31 December 2004
Unaudited Audited
Year ended 31 18 months
December 2004 ended 31
December 2003
�'000 �'000
Net cash outflow from operating (1,107) (3,089)
activities
Return on investments and servicing 20 59
of
finance
Corporation tax refund 180 323
Capital expenditure (317) (223)
Acquisitions (3,838) -
Net cash outflow before financing (5,062) (2,930)
Management of liquid resources - 2,802
Financing 3,310 3,875
(Decrease) / Increase in cash (1,752) 3,747
Unaudited Audited
Year ended 31 18 months
December 2004 ended 31
December 2003
Reconciliation of operating loss to �'000 �'000
net cash outflow from operating
activities:
Operating loss (2,281) (5,941)
Depreciation 596 1,022
Amortisation 56 1,783
Decrease/(Increase) in stocks 572 (155)
Decrease/(Increase) in debtors 228 (73)
(Decrease)/Increase in creditors (227) 255
Decrease in current asset investment - 20
Other non-cash movements (51) -
Net cash outflow from operating (1,107) (3,089)
activities
Unaudited Audited
Year ended 31 18 months
December 2004 ended 31
December 2003
Reconciliation of net cash flow to �'000 �'000
movement in net funds:
(Decrease)/Increase in cash (1,752) 3,747
Cash inflow from short term deposits - (2,802)
Cash outflow from lease financing 142 250
Exchange differences on (37) -
retranslation
Change in net funds resulting from (1,647) 1,195
cash flow
New finance leases - (499)
Net funds at beginning of period 3,968 3,272
Net funds at end of period 2,321 3,968
Notes
1 Consolidated turnover for the year ended 31 December 2004
Unaudited Audited
Year ended 18 months
31 December ended 31
2004 December
2003
�'000 �'000
United Kingdom 3,577 4,137
Rest of Europe 2,400 831
Americas 3,350 472
Asia 472 156
Rest of World 394 80
10,193 5,676
Segmental analysis
Following the acquisition of Tepnel Lifecodes, Tepnel Diagnostics and Diaclone
Research, the Board believe there to be two distinct business classes being,
Research Products and Services, and Molecular Diagnostics. The businesses
included in the comparative figures form part of Research, Products and
Services.
Class of business
Unaudited Audited
2004 Class of business 2003 Class of business
Research Research
Products Products
and Molecular and Molecular
Services Diagnostics Total Services Diagnostics Total
�'000 �'000 �'000 �'000 �'000 �'000
TURNOVER
Total sales to third 4,068 6,125 10,193 5,676 - 5,676
parties
LOSS BEFORE TAXATION (2,196) (65) (2,261) (5,882) - (5,882)
NET ASSETS
Segment net assets 7,689 (130) 7,559 5,895 - 5,895
Geographical segments
Unaudited Audited
2004 Geographical segments 2003 Geographical segments
UK EU US Asia Rest Group UK EU US Asia Rest Group
of of
World World
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
TURNOVER
Sales to third 3,577 2,400 3,350 472 394 10,193 4,137 831 472 156 80 5,676
parties by
geographical
destination
Sales to third 5,295 25 4,873 - - 10,193 5,676 - - - - 5,676
parties by
geographical
origin
LOSS BEFORE
TAXATION
Segmental loss (2,094) (29) (138) - - (2,261) (5,882) - - - - (5,882)
NET ASSETS
Segment net 7,889 (30) (300) - - 7,559 5,895 - - - - 5,895
assets
2 Exceptional items
Unaudited Audited
Year ended 31 18 months
December 2004 ended 31
December 2003
�'000 �'000
Fixed asset impairment - 528
Goodwill impairment - 1,642
Foreign currency exchange loss - 178
Redundancy costs1 41 -
Costs relating to restructuring and 506 -
relocation1
547 2,348
1 The lack of progress in sales of the Nucleoplex and Nucleopure instruments
systems has resulted in cessation of continued research, development, sales and
marketing activities associated with these products. The Company has provided
at year-end a total of �547,000, comprising �506,000 for write down of stocks
of the Nucleopure and Nucleoplex instruments systems held at 31 December 2004
and �41,000 for redundancy costs for people employed directly or indirectly on
these projects.
3 Fair value of assets acquired
Tepnel Life Sciences PLC acquired Tepnel Lifecodes and Tepnel Diagnostics,
formerly Orchid Diagnostics, on 21 January 2004 and Diaclone on 15 December
2004.
Unaudited
Purchase of subsidiary Orchid Diaclone Total
undertakings Diagnostics
�'000 �'000 �'000
Tangible fixed assets 929 18 947
Stocks 1,321 534 1,855
Debtors 953 223 1,176
Prepayments 146 43 189
Cash at bank and in hand 13 37 50
Creditors (1,920) (378) (2,298)
Net assets acquired 1,442 477 1,919
Goodwill 616 1,353 1,969
2,058 1,830 3,888
less costs of acquisition (598) (81) (679)
Satisfied by cash 1,460 1,749 3,209
Unaudited
Provisional fair value of Fair value adjustments
assets acquired (Orchid
Diagnostics):
Book value Revaluations Accounting Fair value
policy
alignment
�'000 �'000 �'000 �'000
Tangible fixed assets 1,897 - (968) 929
Stocks 1,395 - (74) 1,321
Debtors 982 - (29) 953
Prepayments 171 - (25) 146
Cash at bank and in hand 13 - - 13
Creditors (1,748) - (172) (1,920)
2,710 - (1,268) 1,442
Unaudited
Provisional fair value of Fair value adjustments
assets acquired (Diaclone):
Book value Revaluations Accounting Fair value
policy
alignment
�'000 �'000 �'000 �'000
Tangible fixed assets 18 - - 18
Stocks 807 - (273) 534
Debtors 223 - - 223
Prepayments 43 - - 43
Cash at bank and in hand 37 - - 37
Creditors (378) - - (378)
750 - (273) 477
Unaudited
Total provisional fair Fair value adjustments
value of assets acquired:
Book value Revaluations Accounting Fair value
policy
alignment
�'000 �'000 �'000 �'000
Tangible fixed assets 1,915 - (968) 947
Stocks 2,202 - (347) 1,855
Debtors 1,205 - (29) 1,176
Prepayments 214 - (25) 189
Cash at bank and in hand 50 - - 50
Creditors (2,126) - (172) (2,298)
3,460 - (1,541) 1,919
4 Reconciliation of movement of shareholders funds
Unaudited Audited
Year ended 31 18 months ended
December 2004 31 December
2003
�'000 �'000
Loss for the year/period and net (2,242) (5,661)
increase in shareholders' deficit
Other recognised losses for the (36) -
year
Issue of shares (including premium) 3,942 4,224
Net additions/(reduction) to equity 1,664 (1,437)
shareholders' funds
Opening equity shareholders funds 5,895 7,332
Closing equity shareholders funds 7,559 5,895
5 Loss per share
Unaudited Audited
Year ended 31 18 months
December 2004 ended 31
December 2003
Shares in issue (weighted average) 148,403,632 101,402,875
Loss for period �2,242,000 �5,661,000
Loss per share 1.5p 5.6p
Diluted loss per share 1.5p 5.6p
6 Reconciliation of results for the 12 months ended 31 December 2003
Unaudited Audited Unaudited
6 months ended 18 months ended 12 months ended
31 December 31 December 31 December
2002 2003 2003
�000s �000s �000s
Sales 1,805 5,676 3,871
Cost of Sales (1,096) (3,041) (1,945)
Gross Profit 709 2,635 1,926
Operating Expenses:
Research and Development (515) (1,613) (1,098)
Sales and Marketing (469) (1,295) (826)
Administrative expenses (1,153) (3,320) (2,167)
(excluding exceptional items)
Exceptional items - (2,348) (2,348)
(Administrative expenses)
Total Operating Expenses (2,137) (8,576) (6,439)
Operating loss before interest (1,428) (5,941) (4,513)
Interest 54 100 46
receivable
Interest payable (1) (41) (40)
Loss before tax (1,375) (5,882) (4,507)
Taxation 57 221 164
Loss after tax (1,318) (5,661) (4,343)
Operating Loss before (1,428) (3,593) (2,165)
exceptional items
7 The preliminary results for the year ended 31 December 2004 have been
approved by the Directors. Our Auditors have not issued a report on the results
for the year ended 31 December 2004 under Section 235 of the Companies Act
1985. The accounts for the year ended 31 December 2004 will be delivered to the
Registrar of Companies in due course. The financial information set out above
does not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The audited information as at 31 December 2003 has been
extracted from the statutory accounts for the period ended 31st December 2003,
which have been delivered to the Registrar of Companies and whilst the audit
opinion was unqualified, the Auditors included an explanatory paragraph
regarding going concern.
8 The directors do not recommend the payment of a final dividend.
9 The operating loss is arrived at after writing off research and development
expenditure and exceptional items to the profit and loss account in the period
in which it was incurred
10 The accounting policies used are consistent with those applied in the latest
published company accounts.
END
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