RNS Number:7239A
Tepnel Life Sciences PLC
31 March 2006
31st March 2006
TEPNEL LIFE SCIENCES PLC ("the Company", AIM:TED)
www.tepnel.com
Tepnel's preliminary results for the year ended 31st December 2005
Tepnel Life Sciences provides research products and services to the fast growing
pharmaceutical and biotechnology markets and molecular diagnostic products and
services to healthcare providers
Highlights
* 33% increase in annual sales to #13.60 million (2005) from #10.19
million (2004)
* Reduction in operating losses before interest, tax, depreciation,
amortisation and exceptional items to #0.17 million (2005) from
#1.08 million (2004) (Note 5)
* Reduction in annual operating losses (pre-exceptional items) to #0.92
million (2005) from #1.73 million (2004)
* Reduction in operating losses to #1.90 million (2005) from #2.28
million (2004)
* Operating cash outflow reduced to #0.17 million (2005) from #1.06
million (2004)
* Launch of new business strategy focused on Research Products &
Services and Molecular Diagnostics
* Substantial organic growth from both divisions
* Successful integration of businesses acquired in 2004
Chairman's Statement
2005 has been a highly successful year for Tepnel with the achievement of its
key strategic and operational goals. Following the Group's acquisitions of
Tepnel Lifecodes Corporation, Tepnel Diagnostics and Diaclone Research in 2004,
the Board's strategic objective in 2005 was to focus the Group on its two
divisions, Research Products and Services and Molecular Diagnostics, as
announced in March at our strategic briefing for investors. The Group's
operational objectives revolved around continued organic growth, the integration
of the newly acquired businesses and progress towards profitability.
The year began strongly with the signing of a comprehensive research
collaboration between newly acquired Diaclone and a top twenty pharmaceutical
company from Germany, Boehringer Ingelheim. As well as bringing significant
income, the deal underlined the value of the Group's strategy of penetrating
both the research products and molecular diagnostic markets. Under the terms of
the agreement, Diaclone is developing antibodies for Boehringer Ingelheim for
therapeutic use and successful molecules will generate milestone payments for
Tepnel as they progress through drug development. Any antibodies not
commercialised by Boehringer Ingelheim will be available for Tepnel to develop
for diagnostic and research applications bringing a second opportunity for value
creation.
Organic growth was accelerated by the launch of a series of new and highly
innovative products from both Tepnel operating divisions in 2005. These ranged
from tests for significant diseases such as cystic fibrosis and Down syndrome,
to food-safety tests for the detection of casein to protect children with
dairy-food allergy.
The pharmaceutical services business also saw strong growth with major contracts
signed with large pharmaceutical companies for DNA purification and analysis
services and significant increases in turnover in microbiology and analytical
services.
Financial results
Turnover for the year ended 31st December 2005 grew to #13.60m from #10.19m.
This was driven by growth across the Group with Research Products and Services
turnover increasing by 45% to reach #5.88m (2004: #4.07m) and Molecular
Diagnostics growing by 26% to #7.72m (2004: #6.12m).
Operating losses before interest, tax, depreciation and amortisation (LBITDA)
and exceptional items for the year ended 31st December 2005 were #0.17m, (2004:
#1.08m), a reduction of 84%. Operating losses before exceptional items were
reduced by 47% to #0.92m (2004: #1.73m). The overall operating loss, after
exceptional items totalling #0.98m, was reduced by 17% to #1.90m (2004: #2.28m).
The retained loss for the year after taxation was #1.91m (2004: #2.24m).
The basic loss per share for the year was 0.9 pence (2004: 1.5 pence).
Net cash outflow from operating activities was reduced to #0.17m compared to
#1.06m in the prior year and this was reflected in a reduction in net funds of
only #0.14m during the year. Cash balances at 31 December 2005 amounted to
#2.28m (2004: #2.54m). Net assets at the year-end totalled #5.68m (2004:
#7.56m).
Overall, Tepnel has once again demonstrated increased sales and increased gross
profits year on year. In addition, losses before interest, tax and exceptional
items were significantly reduced.
Board changes
The employment contract of Group Finance Director, Mr Gron Ffoulkes-Davies, was
terminated on 29th November 2005 and a search is underway for his successor.
Michael Slater, the new Group Financial Controller, has taken day-to-day
responsibility for the finance and accounting function.
Post balance-sheet events
In February 2006, the Group completed the #90,000 purchase of 1.7 acres of land
in Livingston, Scotland for the construction of a dedicated pharmaceutical
protein and genomic analysis facility. The 18,000 square foot state-of-the-art
laboratory will allow us to consolidate our existing pharmaceutical services
business into a single location and expand our pharmacogenomics capabilities to
include high throughput genotyping and other genomic analysis techniques.
In March 2006, the Group completed the #30,000 acquisition of the GenXTrak DNA
extraction business from UK-based Whatman plc. The Cambridge based GenXTrak
business will now operate within Tepnel's service division, offering rapid and
reliable extraction, purification, quantification and normalisation of clinical
DNA samples.
Future Prospects
Following the integration of the newly acquired businesses and the focusing of
our strategy on both Research Products and Services and Molecular Diagnostic
divisions, the Group has improved its performance once again in 2005.
The Group is focusing its Molecular Diagnostic product development efforts into
two growth markets: organ transplant monitoring and foetal distress diagnosis.
These products include expanded lines of both pre and post operating transplant
monitoring assays based on its highly multiplexed Luminex platform, as well as
its QST*R assays for ploidy status of embryos as early as 9-10 weeks for the
detection of Down, Edwards and Patau syndromes.
The Research Products and Services division has expanded its capacity for
nucleic acid purification (NAP) and analysis services, and has become one of the
leading suppliers of NAP services in Europe. The Group is adding an expanded
menu of downstream analytical capabilities including PCR and genotyping.
Current Trading
Tepnel has made a good start to the year. The Board is confident of reporting
further progress towards profitability in 2006.
Alec Craig
Non-Executive Chairman
Consolidated Profit and Loss Account for the year ended 31 December 2005
Note Year ended 31 December Year ended 31 December
2005 2004
#'000 #'000
Turnover 1 13,602 10,193
Cost of sales - normal (6,718) (5,467)
- exceptional 2 (556) -
Total cost of sales (7,274) (5,467)
Gross profit 6,328 4,726
Administrative expenses - normal (3,528) (2,722)
- exceptional 2 (419) (547)
Total administrative expenses (3,947) (3,269)
Research and development (1,738) (1,553)
Sales and distribution costs (2,542) (2,185)
Operating loss (1,899) (2,281)
Interest receivable 89 43
Interest payable (205) (23)
Loss on ordinary activities before taxation 1 (2,015) (2,261)
Taxation on loss on ordinary activities 110 19
Loss for the financial period 4 (1,905) (2,242)
Basic and diluted loss per share 3 0.9p 1.5p
Operating loss excluding exceptional items (924) (1,734)
Consolidated Statement of Total Recognised Gains and Losses for the year ended
31 December 2005
Year ended 31 December Year ended 31 December
2005 2004
#'000 #'000
Loss for the financial period (1,905) (2,242)
Currency translation differences on retranslation of 14 (36)
subsidiary undertakings
Total losses recognised since last annual report (1,891) (2,278)
All items dealt with in arriving at operating loss above relate to continuing
operations.
Consolidated Balance Sheet at 31 December 2005
Note 31 December 2005 31 December 2004
#'000 #'000
Fixed assets
Intangible assets 1,665 1,882
Tangible assets 1,500 1,851
3,165 3,733
Current assets
Stocks 2,247 2,279
Debtors 3,140 2,932
Cash at bank and in hand 2,279 2,542
7,666 7,753
Creditors: amounts falling due within one year (4,937) (3,927)
Net current assets 2,729 3,826
Total assets less current liabilities 5,894 7,559
Creditors: amounts falling due after more than one year (20) -
Provisions for liabilities and charges (190) -
Net assets 1 5,684 7,559
Capital and reserves
Called up share capital 2,132 2,129
Share premium account 33,601 33,588
Profit and loss account (30,049) (28,158)
Shareholders' funds 4 5,684 7,559
Consolidated Cash Flow Statement for the year ended 31 December 2005
Consolidated cash flow statement Year ended Year ended
31 December 31 December
2005 2004
#'000 #'000
Net cash outflow from operating activities (171) (1,057)
Return on investments and servicing of finance 75 20
Corporation tax refund 90 180
Capital expenditure (230) (317)
Acquisitions - (3,838)
Net cash outflow before management of liquid resources and (236) (5,012)
financing
Management of liquid resources - -
Financing (41) 3,310
Decrease in cash (277) (1,702)
Reconciliation of operating loss to net cash outflow from Year ended Year ended
operating activities 31 December 31 December
2005 2004
#'000 #'000
Operating loss (1,899) (2,281)
Depreciation 555 596
Impairment 84 -
Amortisation 197 56
Loss on disposal of fixed assets 25 -
Decrease in stocks 101 572
(Increase)/decrease in debtors (336) 228
Increase/(decrease) in creditors 1,102 (228)
Net cash outflow from operating activities (171) (1,057)
Reconciliation of net cash flow to movements in net funds Year ended Year ended
31 December 31 December
2005 2004
#'000 #'000
Decrease in cash (277) (1,702)
Cash outflow from decrease in lease financing 144 132
Issued debt - (550)
Changes in net funds resulting from cash flow (133) (2,120)
Conversion of debt to equity - 550
Inception of finance leases (20) -
Exchange differences 14 -
Net funds at beginning of period 2,398 3,968
Net funds at end of period 2,259 2,398
Notes:
1 Segmental analysis
Turnover, loss before taxation and net assets/(liabilities) by business segment:
Year ended 31 December 2005
Research Molecular Total
Products and Diagnostics
Services
#'000 #'000 #'000
Turnover 5,881 7,721 13,602
Divisional profit/(loss) pre (361) 352 (9)
exceptional and central costs
Divisional exceptional costs (312) (473) (785)
Divisional loss (673) (121) (794)
Central costs (including #190,000 exceptional) - - (1,105)
Interest - - (116)
Loss before taxation - - (2,015)
Net assets 4,246 1,438 5,684
Year ended 31 December 2004
Research Products Molecular Total
and Services Diagnostics
#'000 #'000 #'000
Turnover 4,068 6,125 10,193
Divisional loss pre (742) (65) (807)
exceptional and central costs
Divisional exceptional costs (547) - (547)
Divisional loss (1,289) (65) (1,354)
Central costs - - (927)
Interest - - 20
Loss before taxation - - (2,261)
Net assets/(liabilities) 7,689 (130) 7,559
Turnover, profit/(loss) before taxation and net assets by geographical segment:
Year ended Year ended 31
31 December 2005 December 2004
#'000 #'000
Turnover by geographical destination:
UK 3,861 3,577
Rest of EU 3,494 2,400
US 4,139 3,350
Asia 595 472
Rest of World 1,513 394
13,602 10,193
Turnover by geographical origin:
UK 5,741 5,295
Rest of EU 1,404 25
US 6,457 4,873
13,602 10,193
Profit/(loss) before taxation by geographical segment
UK (1,465) (2,095)
Rest of EU 171 (28)
US (721) (138)
(2,015) (2,261)
Net assets/(liabilities) by geographical segment
UK 2,424 7,889
Rest of EU 2,240 (30)
US 1,020 (300)
5,684 7,559
2 Exceptional items
Year ended Year ended
31 December 31 December
2005 2004
#'000 #'000
Cost of sales - exceptional items
Provision for slow moving/obsolete stock lines1 556 -
556 -
Administrative expenses - exceptional items
Provision for unfair dismissal claim2 190 -
Fixed asset impairment3 84 -
Legal and other charges4 145 -
Costs relating to restructuring5 - 506
Redundancy costs5 - 41
419 547
Total exceptional items 975 547
2005
1 Provision for slow moving/obsolete stock lines
The exceptional charge for slow moving and obsolete stock is #556,000. The
Group is constantly improving and developing its product range and during the
year a review of all stock lines across the Group was undertaken and provision
made for slow moving or obsolete lines. In particular, the success of sales of
the Lifematch HLA system has led to slower sales of its RFLP HLA products. The
majority of the provision relates to individual stock items within this product
line which were acquired with the acquisition of Tepnel Lifecodes.
2 Provision for unfair dismissal claim
On the 29th November 2005, the Group terminated the employment contract of Mr G
Ffoulkes Davies, Group Finance Director. Mr G Ffoulkes Davies has brought a
claim for unfair dismissal in the Manchester Employment Tribunal and a defence
to this action has been filed.
The Group has made a provision of #190,000 against any potential award against
the Group for unfair dismissal and any action that may be brought in respect of
breach of contract. The directors believe this represents a prudent estimate of
any award that may be made against the Group. The Group is robustly defending
this claim and is taking legal advice in respect of this issue.
3 Fixed asset impairment
The development of the Group's product range led to several capital items no
longer being used within the business. These items were fully written down
during the year and the total of the impairment charge was #84,000.
4 Legal and other charges
The Group had exceptional legal and other charges during the year of #145,000.
These principally relate to corporate finance and distribution agreements
advice, but also include lease dilapidation and grant repayment charges.
These exceptional items give rise to an unprovided deferred tax asset of
#292,500 due to the availability of tax losses.
2004
5 Redundancy costs and restructuring
The lack of progress in sales of the Nucleoplex and Nucleopure instruments
systems resulted in cessation of continued research, development, sales and
marketing activities associated with these products in 2004. The Group provided
at 31 December 2004 a total of #547,000, comprising #506,000 for write down of
stocks of the Nucleopure and Nucleoplex instruments held at 31 December 2004,
and #41,000 for redundancy costs for people employed directly or indirectly on
these projects.
These exceptional items give rise to an unprovided deferred tax asset of
#164,000 because of the availability of tax losses.
3 Loss per share
The weighted average number of shares in issue during the year was 213,021,836
(Year ended 31 December 2004: 148,403,632). The loss per share has been
calculated on losses of #1,905,000 (Year ended 31 December 2004: #2,242,000).
The basic and dilutive loss per share are the same at 0.9p (2004: 1.5p) because
losses have been incurred which result in all potentially dilutive shares being
treated as antidilutive.
4 Reconciliation of Movements in Shareholders' Funds
31 December 31 December
2005 2004
#'000 #'000
Loss for the financial period (1,905) (2,242)
Other recognised losses in the period 14 (36)
Issue of shares (including premium) 17 4,758
Share issue costs (1) (816)
Net (reduction)/increase in shareholders' funds (1,875) 1,664
Opening shareholders' funds 7,559 5,895
Closing shareholders' funds 5,684 7,559
5 Additional Financial Information
Reconciliation of operating loss to loss before interest, tax, depreciation,
amortisation (LBITDA) and exceptional items
31 December 2005 31 December 2004
#'000 #'000
Operating loss (1,899) (2,281)
Exceptional items 975 547
Depreciation 555 596
Amortisation 197 56
LBITDA pre exceptional items (172) (1,082)
6 Dividends
The directors do not recommend the payment of a final dividend.
7 Accounting policies
The Group has implemented FRS 21: Events after the Balance Sheet
Date, FRS 22: Earning per Share, the presentational requirements of FRS 25:
Financial Instruments and FRS 28: Corresponding Amounts. FRS 25 has been
adopted with full retrospective application. There has been no change to
current year or prior year financial statements in respect of the implementation
of these standards. All other accounting policies used are consistent with
those applied in the latest published Group accounts.
The preliminary results for the year ended 31 December 2005 have
been approved by the directors. Our auditors have issued an unqualified audit
report on the results for the year ended 31 December 2005 under section 235 of
the Companies Act 1985. The accounts for the year ended 31 December 2005 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.
Enquiries:
For Further Information:
Tepnel Life Sciences plc
Ben Matzilevich, CEO
0161 946 2200
Seymour Pierce
Mark Percy, Corporate Finance
0207 107 8000
De Facto Communications
Richard Anderson
020 7861 3838
This information is provided by RNS
The company news service from the London Stock Exchange
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