RNS Number:5770H
Tepnel Life Sciences PLC
14 August 2006
Tepnel Life Sciences plc ('Tepnel' or 'the Company')
Interim results for the 6 months ended 30 June 2006
Manchester, UK, 14th August, 2006: Tepnel Life Sciences plc (AIM: TED), the
UK-based international Research Products & Services and Molecular Diagnostics
group, is pleased to announce its interim results for the six month period ended
30 June 2006.
Highlights
* Group sales totalled #8.16m, an increase of 18.4% over the same period
last year (6 months ended 30 June 2005: #6.89m) comprising:
* Research Products & Services sales increased by 20.9% to #3.47m
(6 months ended 30 June 2005: #2.88m)
* Molecular Diagnostics sales increased by 16.7% to #4.69m
(6 months ended 30 June 2005: #4.01m)
* Earnings before interest, tax, depreciation, amortisation and exceptional
items were #409,000 (6 months ended 30 June 2005: #18,000) (Note 8)
* Operating profit before exceptional items was #45,000 (6 months ended 30
June 2005: operating loss of #391,000)
* Operating loss after exceptional items was #77,000 (6 months ended 30 June
2005: operating loss of #391,000)
* Pre-tax losses for the Group decreased by 66% to #123,000 (6 months ended
30 June 2005: #361,000)
* Net cash outflow from operating activities was #414,000 (6 months ended 30
June 2005: #574,000)
* All acquisitions are now integrated into the two operating divisions,
Molecular Diagnostics and Research Products and Services
* Significant improvements in realising synergies both operationally and
within the sales & marketing functions
Ben Matzilevich, CEO, stated "Our strategy has been to identify significant
molecular diagnostic and research product niche market opportunities and to take
leadership positions in these sectors.
We are especially gratified to see that sales of our genomic products and
services have more than doubled in the first half of this year compared to the
same period last year. Sales of Molecular Diagnostic reagents for organ
transplantation monitoring (bone marrow, kidney, liver, heart, etc.) have
increased by 40% over the same period last year. These are two important
markets where we have invested resources and focused our energies and are now
seeing the benefits of those efforts with sales and profit growth.
In all sectors we are competing with large global players and we have chosen to
compete by targeting superior products into selected regional markets focusing
on highly specialized applications backed up by strong technical support. Our
new facilities in Scotland, where we began construction this month, will give us
the laboratories we need to maintain our growth and expand our genomic and
proteomic product lines.
We believe that close attention to the bottom line and expanded sales and
marketing efforts into the USA, as well as our strong product pipeline, will
help position Tepnel for continued growth and improved profitability."
CHAIRMAN'S STATEMENT
Interim Results for the 6 months ended 30 June 2006
Financial Results
In the six months ended 30 June 2006, turnover for the Group increased by 18.4%
to #8.16m (6 months ended 30 June 2005: #6.89m).
Operating profit before exceptional items was #45,000 (6 months ended 30 June
2005: operating loss of #391,000).
Pre-tax losses for the Group during the period decreased by 66% to #123,000
(6 months ended 30 June 2005: #361,000).
The loss per share during the period decreased to 0.04p (6 months ended 30 June
2005: 0.1p).
Cash and cash equivalents at the end of the period were #2.89m (30 June 2005:
#1.81m).
Overview
The first half of 2006 has marked the beginning of a very significant year for
Tepnel, one that has seen the Company reach a turning point in its history. I am
delighted to report that in the first six months Tepnel has made its first ever
operating profit before exceptional items and I firmly believe that the Company
will now continue to build on this success.
We are reaping the benefits of the strategic reorganisation that we made in 2005
following our earlier acquisitions of Orchid Diagnostics and Diaclone. Every
part of the Company has now been fully integrated into our two operating
divisions and consequently we have been able to benefit from the operational and
sales and marketing synergies that we anticipated.
Revenues have continued to grow at levels beyond the sector average with
half-year sales totalling #8.16m, 18.4% ahead of the same period last year,
continuing to build on 2005's organic growth over and above that resulting from
our acquisitions.
Overall operating profits before exceptional items for the 6 months ended 30
June 2006 were #45,000 and after exceptional items we saw a small operating loss
of #77,000 (6 months ended 30 June 2005: operating loss of #391,000).
Three further highlights of the first half of this year included the completion
in February of the land purchase in Livingston, Scotland for our new dedicated
pharmaceutical, protein and genomic analysis facility which is expected to be
fully operational during the second quarter of 2007. The Company also made a
further small acquisition in early March by purchasing the GenXTrak DNA
extraction business from UK-based Whatman plc. Finally, we secured a further
#1.2m of capital in June through a share placing with proceeds to be used in
part to fund the Company's new facility in Scotland and to provide additional
working capital required as a consequence of our increased sales.
Molecular Diagnostics
Sales for the 6 months ended 30 June 2006 for the Molecular Diagnostics Division
were 16.7% ahead of the previous year. Sales of leading products increased
significantly and new product development and new product launches continued.
Sales of our Elucigene(TM) assays for simple and rapid mutation detection
continued to improve and in particular we saw increased sales of the CF-HT kit
for detecting genetic mutations for cystic fibrosis that we launched in 2005. We
also launched and saw first sales of our QST*R test for rapid detection of
foetal abnormalities such as Down Syndrome.
As we experienced last year, the LifeMatch(R) antibody detection system for use
with Luminex(TM) multiplex analysis technology has continued to capture market
share with a further 40% sales growth in the HLA typing marketplace for organ
transplant diagnostics during the first half of 2006. The system benefits from
high sensitivity, rapid assay times and optimal reagent use. We continue to
develop other LifeMatch(R) products to further expand this successful product
line.
Research Products & Services
Overall sales from Tepnel's Research Products & Services Division for the 6
months ended 30 June 2006 were 20.9% ahead of the same period last year. This
division comprises the Group's activities in genomic services, outsourcing
services for the pharmaceutical and healthcare industries, food testing and
immunological reagents businesses.
Sales from our genomics services group have increased by over 100% compared to
the prior year and we have also seen significant growth in sales of other
services outsourced from the pharmaceutical industry such as analytical
chemistry, bioanalysis and stability testing. This continued upward demand from
the pharmaceutical and biotechnology sectors has made the construction of our
18,000 square foot state-of-the-art facility in Scotland essential. The new
facility will allow us to add significant capacity, deliver services of the
highest quality at competitive prices and maintain our position as a sector
leader in both genetic and protein analysis. Our leadership in this area has
been further underlined by our recent appointment as preferred suppliers to
AstraZeneca for certain genomic services and the signing of a quality agreement
with Pfizer, one of the world's leading pharmaceutical companies. Under the
scope of this agreement Tepnel has been selected as a supplier to Pfizer for
analytical chemistry and specialized microbiological services.
Our acquisition in March of the Cambridge-based GenXTrak(TM) business from
Whatman plc expanded our DNA extraction offering and now positions the Company
as one of Europe's largest providers of DNA extraction services.
Our food testing business has continued to do well this year and we saw further
revenue growth from sales of food allergen test kits as we increased US market
penetration made possible by distribution through our facility in Stamford,
Connecticut. This is another example of how we are benefiting from
organisational synergies. We also continued development of new allergen kits,
including Hazelnut, Almond, Walnut and Crustacea, and immunological reagents
products.
Prospects
The Company has had a record first six months in 2006. Operational synergies
that we foresaw in 2005 have helped to improve our margins and we have grown our
revenues after streamlining the business around profitable, core operations.
Through the remainder of 2006, the Company will pursue aggressive revenue growth
while planning for sustainable future success through a combination of
intelligent strategic planning, more intensive marketing of the company and its
products, and a continued focus on increasing efficiencies.
We remain committed to building value in the Company for our shareholders, while
creating a challenging and rewarding workplace for our employees.
Alec Craig
Non-Executive Chairman
14th August 2006
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 / Deborah Cockerill
020 7861 3838
Notes to Editors
About Tepnel Life Sciences plc
Tepnel Life Sciences (TLS) is a UK based international biotechnology company.
The Company has laboratories, manufacturing and operations in the USA, UK and
France with 195 employees. TLS provides test kits, reagents and services to two
highly synergistic markets, these being Molecular Diagnostics and Biomedical
Research. The company's strategy has been to identify high growth niche
opportunities within these multi-billion pound markets. TLS focuses on these
niche opportunities with internally developed products, patents, expertise and
know-how as well as strategic acquisitions, to develop a leadership position
within these defined market segments.
Consolidated Profit & Loss Account
for the 6 months ended 30 June 2006
Audited
6 months Year ended 6 months
Note ended 30 31 December ended 30
June 2006(1) 2005 June 2005 1,2
#'000 #'000 #'000
Turnover 2 8,164 13,602 6,893
Cost of sales - normal (4,009) (6,718) (3,301)
Cost of sales - exceptional 3 - (556) -
Total cost of sales (4,009) (7,274) (3,301)
Gross profit 4,155 6,328 3,592
Administrative expenses - normal (1,861) (3,528) (1,821)
Administrative expenses - exceptional 3 (122) (419) -
Total administrative expenses (1,983) (3,947) (1,821)
Research and development costs (895) (1,738) (865)
Sales and distribution costs (1,354) (2,542) (1,297)
Operating loss (77) (1,899) (391)
Interest receivable 35 89 35
Interest payable (81) (205) (5)
Loss on ordinary activities before (123) (2,015) (361)
taxation
Taxation 36 110 69
Loss for the financial period (87) (1,905) (292)
Basic and diluted loss per share 4 0.04p 0.9p 0.1p
Operating profit/(loss) excluding 45 (924) (391)
exceptional items
Statement of Total Recognised Gains and Losses
for the 6 months ended 30 June 2006
Audited
6 months Year ended 6 months
ended 30 June 31 December ended 30
2006(2) 2005 June 2005(1)
#'000 #'000 #'000
Loss for the financial period (87) (1,905) (292)
Currency translation differences on
retranslation of subsidiary undertakings (19) 14 (21)
Total gains and losses recognised since
last annual report (106) (1,891) (313)
Consolidated Balance Sheet
as at 30 June 2006
30 June 2006(3) Audited
31 December 30 June
Note 2005 2005(1)
#'000 #'000 #'000
Fixed assets
Intangible assets 1,630 1,665 1,762
Tangible assets 1,679 1,500 1,675
3,309 3,165 3,437
Current assets
Stocks 2,745 2,247 2,412
Debtors 3,819 3,140 3,615
Cash at bank and in hand 2,893 2,279 1,807
9,457 7,666 7,834
Creditors: amounts falling due within one (5,930) (4,937) (4,025)
year
Net current assets 3,527 2,729 3,809
Total assets less current liabilities 6,836 5,894 7,246
Creditors: amounts falling due after more (92) (20) -
than one year
Provisions for liabilities and charges - (190) -
Net assets 6,744 5,684 7,246
Capital and reserves
Called up share capital 2,302 2,132 2,129
Share premium account 34,597 33,601 33,588
Profit and loss account (30,155) (30,049) (28,471)
Shareholders' funds 6 6,744 5,684 7,246
Consolidated Cash Flow Statement
for the 6 months ended 30 June 2006
Audited 6 months
6 months Year ended ended
ended 30 31 December 30 June
June 2006(4) 2005 2005(1)
#'000 #'000 #'000
Consolidated cash flow statement
Net cash outflow from operating activities (414) (171) (574)
Returns on investments and servicing of finance 32 75 30
Corporation tax refund 75 90 -
Capital expenditure (315) (230) (125)
Acquisitions (40) - -
Net cash outflow before financing (662) (236) (669)
Financing 1,280 (41) (66)
Increase/(decrease) in cash 618 (277) (735)
Audited 6 months
6 months Year ended ended
ended 30 31 December 30 June
June 2006(1) 2005 2005(1)
#'000 #'000 #'000
Reconciliation of operating loss to net cash
outflow from operating activities:
Operating loss (77) (1,899) (391)
Depreciation 263 555 300
Impairment - 84 -
Amortisation 101 197 109
Loss on disposal of fixed assets - 25 -
(Increase)/decrease in stocks (551) 101 (133)
Increase in debtors (888) (336) (619)
Increase in creditors 738 1,102 160
Net cash outflow from operating activities (414) (171) (574)
Audited 6 months
6 months Year ended ended
ended 30 31 December 30 June
Note June 2006(5) 2005 2005(1)
#'000 #'000 #'000
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash 618 (277) (735)
Cash outflow from decrease in lease 20 144 66
financing
Change in net funds resulting from cash 638 (133) (669)
flows
Inception of finance leases (134) (20) -
Exchange differences (4) 14 -
Net funds at beginning of period 2,259 2,398 2,398
Net funds at end of period 5 2,759 2,259 1,729
Notes to the interim financial statements
1 Basis of preparation
The interim financial information has been prepared on the basis of accounting
policies consistent with those applied in the 2005 financial statements, except where
noted below. The financial information is unaudited and has been approved by the
directors. The financial information does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. The statutory accounts for the
year ended 31 December 2005 have been filed with the Registrar of Companies and
contained an unqualified audit opinion.
The Group has implemented FRS 20 'Share-based payments' during the period and taken
advantage of the transitional provisions in respect of share-based payments granted
and fully vested before 1 January 2006. There has been no change to current year or
prior year financial statements in respect of the implementation of this standard.
Certain costs in the profit and loss account for the 6 months ended 30 June 2005 have
been reclassified between cost captions. There is no change to turnover or operating
profit as a result of this reclassification which relates to the allocation of costs
between cost of sales, administrative expenses, sales and distribution, and research
and development costs. This has been done to ensure the classification is consistent
with the accounts for the year ended 31 December 2004 and 2005 and with the accounts
for the 6 months ended 30 June 2006. The effect of this reclassification on the
accounts for the 6 months ended 30 June 2005 is to decrease gross profit by #497,000,
decrease administrative expenses by #285,000, decrease sales and distribution costs by
#124,000 and decrease research and development costs by #88,000.
2 Segmental analysis
6 months ended 30 June 2006(6)
Turnover by geographical Research Products Molecular
destination and Services Diagnostics Total
#'000 #'000 #'000
UK 1,795 252 2,047
Rest of Europe 1,356 1,011 2,367
US 191 2,079 2,270
Asia 37 1,147 1,184
Rest of World 97 199 296
3,476 4,688 8,164
Audited
Year ended 31 December 2005
Turnover by geographical Research Products Molecular Total
destination and Services Diagnostics
#'000 #'000 #'000
UK 3,191 670 3,861
Rest of Europe 1,912 1,582 3,494
US 540 3,599 4,139
Asia 74 521 595
Rest of World 164 1,349 1,513
5,881 7,721 13,602
6 months ended 30 June 2005(1)
Turnover by geographical Research Products Molecular Total
destination and Services Diagnostics
#'000 #'000 #'000
UK 1,624 300 1,924
Rest of Europe 1,111 875 1,986
US 72 1,877 1,949
Asia 6 342 348
Rest of World 63 623 686
2,876 4,017 6,893
(1) Neither audited nor reviewed.
3 Exceptional items
6 months Audited 6 months
ended 30 Year ended ended 30
June 2006(7) 31 December 2005 June 2005(1)
Cost of sales - exceptional items #'000 #'000 #'000
Provision for slow - 556 -
moving/obsolete stock lines(3)
- 556 -
Administrative expenses -
exceptional items
Settlement of unfair dismissal 122 - -
claim(1)
Provision for unfair dismissal - 190 -
claim(2)
Fixed asset impairment(4) - 84 -
Legal and other charges(5) - 145 -
122 419 -
Total exceptional items 122 975 -
2006
1 Settlement of unfair dismissal claim
On 24 May 2006, the Group settled the unfair dismissal claim brought by former
Group Finance Director, Mr G P Ffoulkes-Davies. The #122,000 charge reflects the
settlement made in excess of the provision made in 2005 (see below) as well as
associated legal costs incurred. As part of this settlement Mr G P
Ffoulkes-Davies paid in full the outstanding unpaid share capital of #134,500 on
the 3,000,000 shares purchased in 2004, together with the interest accrued on
this amount.
2005
2 Provision for unfair dismissal claim
On 29 November 2005, the Group terminated the employment contract of Mr G P
Ffoulkes-Davies, Group Finance Director. Mr G P Ffoulkes-Davies had brought a
claim for unfair dismissal in the Manchester Employment Tribunal and a defence
to this action had been filed.
The Group 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.
3 Provision for slow moving/obsolete stock lines
The exceptional charge for slow moving/obsolete stock was #556,000. The Group is
constantly improving and developing its product range and during 2005 a review
of all stock lines across the Group was undertaken and a provision made for slow
moving or obsolete lines. In particular, the success of the Lifematch HLA system
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.
4 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 2005 and the total of the impairment charge was #84,000.
5 Legal and other charges
The Group had exceptional legal and other charges during 2005 of #145,000. These
principally relate to corporate finance and distribution agreements advice, but
also include lease dilapidation and grant repayment charges.
4 Loss per share
The basic and diluted loss per share has been calculated on the following basis:
6 months Audited
ended Year ended 6 months
30 June 31 December ended 30
2006(8) 2005 June 2005(1)
Loss for the period (#'000) (87) (1,905) (292)
Weighted average number of
shares 215,435,988 213,021,836 212,927,315
Basic and diluted loss per
share 0.04p 0.9p 0.1p
The basic and diluted loss per share are the same because losses have been
incurred which result in all potentially dilutive shares being treated as
anti-dilutive.
5 Analysis of changes in net funds
Non-cash 30 June
1 January 2006 Cash flow movement 2006(1)
#'000 #'000 #'000 #'000
Cash at bank and in hand 2,279 618 (4) 2,893
Finance leases (20) 20 (134) (134)
Net funds 2,259 638 (138) 2,759
6 Reconciliation of movement in shareholders' funds
Audited
6 months Year ended 6 months
ended 30 June 31 December ended 30
2006(9) 2005 June 2005(1)
#'000 #'000 #'000
Loss for the period (87) (1,905) (292)
Other recognised gains/(losses) in the (19) 14 (21)
period
Issue of shares (including premium) 1,192 17 -
Less issue costs (26) (1) -
Net increase/(reduction) in 1,060 (1,875) (313)
shareholders' funds
Opening shareholders' funds 5,684 7,559 7,559
Closing shareholders' funds 6,744 5,684 7,246
7 Acquisition
In March 2006, the Group completed the #30,000 acquisition of the GenXTrak DNA
extraction business from UK-based Whatman plc. The Cambridge based GenXTrak
business now operates within Tepnel's service division, offering rapid and
reliable extraction, purification, quantification and normalisation of clinical
DNA samples. This acquisition has not been disclosed separately in the 6 months
ended 30 June 2006 financial information on grounds of materiality.
8 Additional financial information
Reconciliation of operating loss to profit/(loss) before interest, tax, depreciation,
amortisation (EBITDA) and exceptional items
Audited
6 months ended Year ended 6 months
30 June 31 December ended 30
2006(1) 2005 June 2005(1)
#'000 #'000 #'000
Operating loss (77) (1,899) (391)
Exceptional items 122 975 -
Depreciation 263 555 300
Amortisation 101 197 109
EBITDA pre exceptional items 409 (172) 18
9 Dividends
The directors do not recommend the payment of an interim dividend in respect of the 6 months ended 30
June 2006.
Copies of this statement are being sent to all shareholders and will be available to the public at the
Company's Registered office at Heron House, Oaks Business Park, Crewe Road, Wythenshawe, Manchester
M23 9HZ.
---------------------------------------
(1) Neither audited nor reviewed.
2 See Note 1
(2) Neither audited nor reviewed.
(3) Neither audited nor reviewed.
(4) Neither audited nor reviewed.
(5) Neither audited nor reviewed.
(6) Neither audited or reviewed
(7) Neither audited nor reviewed.
(8) Neither audited nor reviewed.
(9) Neither audited nor reviewed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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