RNS Number:3074D
Tepnel Life Sciences PLC
05 September 2007
TEPNEL LIFE SCIENCES PLC
Interim results for the six months ended 30 June 2007
Manchester, UK, 5 September 2007: Tepnel Life Sciences plc (AIM: TED), the
international Molecular Diagnostics and Research Products and Services group,
announces interim results for the six month period ended 30 June 2007. These
results are reported under International Financial Reporting Standards ("IFRS").
2007 Highlights
* Tepnel reports its H1 results for 2007, demonstrating continued growth and
profitability.
* Revenue increased to #9.02 million from #8.16 million, an increase of 11%
year on year and 15% on a constant currency basis
* Gross profit increased 22% to #5.07 million with gross margin improving to
56.2% from 50.9% in the previous year
* A 562% increase in operating profit pre-exceptional items to #0.5 million
from #0.08 million in 2006
* Operating profit increased to #0.5 million compared to a loss of #0.05
million in 2006
* EBITDA pre-exceptional items increased 124% to #0.77 million from #0.35
million in 2006
* Tepnel continues to deliver sustained growth in both revenue and operating
profit across both divisions in line with its strategic and operational
plans:
- Research Products and Services revenue increased by 11% driven by the
strong demand for its pharmaceutical outsourcing services
- Molecular Diagnostics revenue increased by 17% (on a constant currency
basis) with LifeMatch reagent sales continuing to show growth of over 40%
compared to the prior period
After the period closed, Tepnel completed the first development phase of its
state-of-the-art pharmaceutical facility in Livingston. This will enable the
Company to meet increased customer demand and broaden its service offering to
its pharmaceutical customers
Results 6 months ended 6 months ended Change
30 June 2007 30 June 2006
#'000 #'000
Group revenue 9,022 8,164 11%
EBITDA (pre exceptionals) 773 345 124%
EBIT (pre exceptionals) 503 76 562%
EBIT 503 (46) +#0.55m
Profit/(loss) after tax 520 (56) +#0.58m
Basic EPS 0.23 pence (0.03) pence +0.26 pence
Gross margin 56.2% 50.9% +5.3%
Commenting on the half year results, Ben Matzilevich, CEO of Tepnel, said: "This
excellent half year performance continues to demonstrate that Tepnel is
achieving its strategic and operational objectives with strong growth in both
revenue and operating profit across both operating divisions. The Livingston
facility will be running at full capacity from September which will enable us to
meet the increased customer demand for our outsourced services. Our key product
lines continue to perform strongly with LifeMatch reagent sales ahead by over
40% compared to the prior year. We are increasingly well positioned for future
growth and continue to develop innovative new products and services for the
molecular diagnostics and research product sectors of our market. These
developments are contributing to Tepnel's goal of achieving long term profits
and sustainable growth for shareholders."
For further information, please contact:
Tepnel Life Sciences plc Capital MS&L
Ben Matzilevich, CEO Mary Clark or Catie Corcoran
Tel: +44 161 946 2200 Tel: +44 20 7307 5330
Seymour Pierce
Mark Percy
Tel: +44 20 7107 8000
About Tepnel Life Sciences
Tepnel Life Sciences (AIM:TED) is a UK-based international life sciences
products and services group with two divisions, Molecular Diagnostics and
Research Products & Services. The Company has laboratories, manufacturing and
operations in the USA, UK and France with 203 employees.
Tepnel 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. Tepnel focuses on these 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.
Chairman's Statement
Overview
The first half of 2007 has been a highly successful period for Tepnel as the
Group has continued to deliver its strategic and operational plans resulting in
significant turnover and profit growth. The Group has built on its first
profitable year in 2006 by achieving growth of 15% on a constant currency basis
and operating profits of #0.5m for the 6 months ended 30 June 2007.
This performance is a direct result of Tepnel's corporate strategy to build
leadership positions in attractive niche markets in the molecular diagnostics
and research products and services sectors.
The key financial highlights include:
* Revenue for the six months to 30 June 2007 increased to #9.02m from
#8.16m, an increase of 11% year on year and 15% on a constant currency
basis.
* Operating profit before exceptional items increased 562% to #0.5m from
#0.08m in 2006.
* Operating profit before interest, tax, depreciation, amortisation
(EBITDA) and exceptional items for the half year increased 124% to
#0.77m from #0.35m in 2006.
* Basic earnings per share for the year were 0.23 pence compared to a
loss per share of 0.03p for 2006
* Cash and cash equivalents at the end of the period were #2.38m (2006:
#2.89m).
Research Products and Services
The Research Products and Services division has delivered an 11% increase in
revenue to #3.85m. This division provides outsourcing services for the
pharmaceutical, biotechnology and healthcare industries, food safety products
and immunological reagents.
This growth has been driven by the demand for Tepnel's pharmaceutical
outsourcing services including nucleic acid purification, microbiology,
chemistry and bioanalysis services, making the increased capacity from the new
Livingston facility essential for future growth.
Tepnel has now completed the first development phase of its new state-of-the-art
pharmaceutical testing facility based in Livingston, Scotland. This facility
currently employs 56 staff who have been relocated from Tepnel's Edinburgh and
Glasgow operations. It will accommodate Tepnel's protein analysis and genomic
testing laboratories as well as the Company's analytical chemistry, bioanalysis
and microbiology facilities.
The second development phase will begin in September and will accommodate
Tepnel's new molecular services group including genotyping, whole genome
amplification, sequencing and gene expression services.
In July, Tepnel acquired laboratory service providers Wildlife DNA Services and
Food DNA Services. Food DNA Services provides high quality genetic information
for identifying food composition and origins, and will be integrated into
Tepnel's existing food safety business.
Wildlife DNA Services is an established provider of genotyping services, and
will accelerate Tepnel's entry into the clinical genotyping market, broadening
its service offering to the pharmaceutical industry.
Tepnel's food safety business continues to make progress by further establishing
its footprint in the US through our facility in Stamford, Connecticut. During
the period three new RAPID 3-D allergen tests for Almond, Hazelnut and Shellfish
were launched and the RAPID tests showed steady growth during the period.
Sales of immunological products are progressing well with continued growth, in
particular through our direct US operation and through our recent distribution
agreement with Abcam.
Molecular Diagnostics
The Molecular Diagnostics division continues to see strong growth with a 17%
increase in revenue (on a constant currency basis) for the year to #5.17m. This
division is focusing on the organ transplant monitoring, foetal diagnostic
testing and genetic predisposition testing markets. Tepnel's innovative product
range includes the LifeMatch transplant monitoring assays and the ELUCIGENE
genetic predisposition assays.
The LifeMatch range of products has delivered an increase in sales of over 40%
compared to the prior year, securing additional market share. These products
are used for the measurement and detection of HLA (Human Leukocyte Antigen)
markers which are used in both bone marrow and solid organ transplantation.
The Lifematch range was extended during the period through the launch of Donor
Specific Antigens (DSA) and Lifematch Single Antigens (LSA). DSA allows
clinicians improved screening of antibodies against HLA antigens ensuring
compatibility and minimising rejections whilst LSA allows clinicians to identify
allele level antigens in highly sensitised patients to minimise chances of
rejection and ensure a better outcome.
In July, Tepnel extended its licence with Luminex Corporation for access to the
Luminex(R) xMAP(R) platform. The Luminex xMAP technology is incorporated into
Tepnel's innovative molecular diagnostics LifeMatch products. It is anticipated
that the extended licence agreement and new products will provide a strong base
for the future growth of the LifeMatch range.
Sales of Tepnel's QST*R product for the rapid detection during pregnancy of
common genetic abnormalities, has shown strong growth compared to the prior year
and continues to gain momentum.
Future Prospects
These results are further evidence of Tepnel's continued progress in achieving
sustainable profits and growth.
We anticipate further growth from our molecular diagnostics LifeMatch and
ELUCIGENE products in the US and Europe. The new facility in Livingston will
enable us to meet the growing customer demand for pharmaceutical outsourcing
services and to broaden the range of services offered to our clients. The
strategic acquisition of Wildlife DNA Services will allow us to accelerate the
delivery of our clinical genotyping offering to our pharmaceutical customers.
We remain committed to building value in the Company for our shareholders, and
look forward to updating shareholders later in the year.
Alec Craig
Non-Executive Chairman
5 September 2007
Group Income Statement
for the 6 months ended 30 June 2007 (unaudited)
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Continuing operations
Revenue 9,022 8,164 16,156
Cost of sales (3,953) (4,009) (7,663)
Gross profit 5,069 4,155 8,493
Selling and distribution costs (1,507) (1,354) (2,655)
Research and development costs (1,011) (895) (1,775)
Administrative expenses - normal (2,048) (1,830) (3,664)
- exceptional - (122) (122)
Total administrative expenses (2,048) (1,952) (3,786)
Operating profit/(loss) 503 (46) 277
Finance income 64 35 80
Finance expense (69) (81) (143)
Profit/(loss) before taxation 498 (92) 214
Tax credit 22 36 154
Profit/(loss) for the period 520 (56) 368
Operating profit before exceptional items 503 76 399
Basic earnings/(loss) per share 0.23p (0.03)p 0.17p
Diluted earnings/(loss) per share 0.21p (0.03)p 0.16p
Group statement of recognised income and expense
for the 6 months ended 30 June 2007 (unaudited)
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Income and expenses recognised directly in equity
Exchange differences on retranslation of foreign (14) (19) (58)
operations
Profit/(loss) for the period 520 (56) 368
Total recognised income and expenses for the period 506 (75) 310
Group Balance Sheet
as at 30 June 2007 (unaudited)
30 June 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
Non-current assets
Property, plant and equipment 4,241 1,679 2,246
Intangible assets 1,843 1,770 1,836
Deferred tax asset 104 - 104
6,188 3,449 4,186
Current assets
Inventories 2,495 2,745 2,645
Trade and other receivables 4,229 3,782 3,051
Income tax receivable 110 37 88
Cash and short-term deposits 2,380 2,893 3,857
9,214 9,457 9,641
Total assets 15,402 12,906 13,827
Current liabilities
Trade and other payables (6,054) (5,869) (5,108)
Financial liabilities (192) (42) (88)
Income tax payable (152) (119) (151)
(6,398) (6,030) (5,347)
Non-current liabilities
Financial liabilities (1,289) (92) (1,307)
Total liabilities (7,687) (6,122) (6,654)
Net assets 7,715 6,784 7,173
Capital and reserves
Equity share capital 36,878 36,899 36,878
Foreign exchange reserve (72) (19) (58)
Retained earnings (29,091) (30,096) (29,647)
Total equity 7,715 6,784 7,173
Group Cash Flow Statement
For the 6 months ended 30 June 2007 (unaudited)
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Operating activities
Profit/(loss) for the period 520 (56) 368
Adjustments to reconcile profit/(loss) for the period to
net cash flow from operating activities:
Tax credit (22) (36) (154)
Net finance costs 5 46 63
Depreciation of property, plant and equipment 264 263 509
Amortisation of intangible fixed assets 6 6 11
Share based payments 36 - 25
(Increase)/decrease in trade and other receivables (1,186) (888) (221)
(Increase)/decrease in inventories 115 (551) (547)
Increase/(decrease) in trade and other payables 69 802 (4)
Cash generated from operating activities (193) (414) 50
Income tax received - 75 73
Net cash inflow/(outflow) from operating activities (193) (339) 123
Investing activities
Interest received 64 48 80
Purchase of business - (40) (39)
Payments to acquire property, plant and equipment (1,301) (315) (1,213)
Proceeds from sale of property, plant and equipment 8 - -
Payments to acquire intangible assets (2) - (5)
Net cash outflow from investing activities (1,231) (307) (1,177)
Financing activities
Interest paid (10) (16) (22)
Proceeds from issue of share capital - 1,300 1,276
Repayment of capital element of finance leases (40) (20) (36)
New borrowings - - 1,234
Net cash inflow from financing activities (50) 1,264 2,452
Increase in cash and cash equivalents (1,474) 618 1,398
Cash and cash equivalents at the beginning of the period 3,657 2,279 2,279
Effect of exchange rates on cash and cash equivalents (3) (4) (20)
Cash and cash equivalents at the end of the period 2,180 2,893 3,657
Notes to the Group financial statements
1. Significant accounting policies
Basis of preparation
The consolidated financial statements of Tepnel Life Sciences plc for the 6
month ended 30 June 2007 were authorised for issue by the directors on 4
September 2007.
The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The audited UK GAAP annual financial statements for the year
ended 31 December 2006 have been delivered to the Registrar of Companies and
contained an unqualified audit opinion.
These consolidated interim financial statements are presented in Sterling and
all values are rounded to the nearest thousand (#'000) except when otherwise
indicated.
Prior to 2007 the Group prepared its audited financial statements under UK GAAP.
For the year ended 31 December 2007, the Group is required to prepare its annual
consolidated financial statements in accordance with International Financial
Reporting Standards as adopted in the European Union ("IFRS"). IFRS 1 'First
time adoption of International Financial Reporting Standards', requires an
entity to comply with each IFRS effective at the reporting date for its first
IFRS financial statements. The accompanying financial information has been
prepared based on the current status of IFRS or Interpretations issued by the
International Financial Reporting Interpretations Committee ('IFRIC').
It should be noted that there is a possibility that the full year IFRS
comparatives may require adjustment before constituting final IFRS accounts.
This is because the IFRS standards that will be applicable at 31 December 2007
including those that will be applicable on an optional basis are not known with
certainty at the time of preparing this document.
As a general rule, IFRS 1 requires the standards effective at the reporting date
to be applied retrospectively. However retrospective application is prohibited
in some areas, particularly where retrospective application would require
judgement by management about past conditions after the outcome of the
particular transaction is already known. A number of optional exemptions from
full retrospective application of IFRS are granted where the cost of compliance
is deemed to exceed the benefits to users of the financial statements. Where
applicable, the options selected by management are set out in note 10 below. As
required by IFRS 1, the effect of transition from UK GAAP to IFRS on the Group's
equity and profit has been explained in note 10.
Changes in accounting policies
Accounting policies detailed below have been adopted and these are in compliance
with IFRS.
Basis of consolidation
The consolidated accounts incorporate the financial statements of Tepnel Life
Sciences Plc and all of its subsidiary undertakings made up to 30 June 2007.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group, and deconsolidated from the date that control ceases.
The financial statement of subsidiaries used in the preparation of the
consolidated financial statements are prepared for the same reporting period of
the parent company and are based on consistent accounting policies.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated, including unrealised profits or losses.
Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates, VAT and other sales taxes or duty. The following criteria
must also be met before revenue is recognised:
Sale of goods
Revenue from sale of goods is recognised when the significant risks and rewards
of ownership of the goods have passed to the buyer, usually on dispatch of the
goods.
Rendering of services
Revenue from the provision of services is recognised when the services have been
performed.
Licence fees and royalties
Licence fees and royalties are recognised over the period of the groups related
obligations.
Interest income
Revenue is recognised as interest accrues using the effective interest rate
method. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial
instrument to its net carrying amount.
Goodwill and business combinations
Business combinations on or after 1 January 2006 are accounted for under IFRS3
using the purchase method. Any 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 is recognised in the balance sheet as
goodwill and is not amortised. To the extent that the net fair value of the
acquired entity's identifiable assets, liabilities and contingent liabilities is
greater than the cost of the investment, a gain is recognised immediately in the
income statement. Goodwill recognised as an asset at 31 December 2005 is
recorded at its carrying amount under UK GAAP and is not amortised.
After initial recognition goodwill is stated at cost less any accumulated
impairment losses, with the carrying value being reviewed for impairment
annually and whenever events or changes in circumstances indicate that the
carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related
cash-generating units monitored by management, usually at business segment level
or statutory company level as the case may be. Where the recoverable amount of
the cash-generating unit is less than its carrying amount, including goodwill,
an impairment loss is recognised in the income statement.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment in value. Such cost includes expenditure that is directly
attributable to the acquisition of the asset or in making the asset capable of
operating as intended.
Depreciation is provided on a straight line basis to write off the cost, less
estimated residual values, of all tangible fixed assets over their expected
useful lives. It is calculated using the following rates:
Freehold land is not depreciated
Buildings 2% per annum
Short leasehold improvements equally over the lease period
Plant and equipment 15-33% per annum
Fixtures and fittings 20-33% per annum
Depreciation is not provided for on assets in construction.
Annual reviews are performed on the expected useful lives and estimated residual
values of the individual assets. The carrying values of tangible fixed assets
are reviewed for impairment if events or changes in circumstances indicate the
carrying value may not be recoverable. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with their
carrying amount and are included in the income statement.
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of these assets, until such time as the assets are
substantially ready for their intended use or sale. All other borrowing costs
are recognised in profit or loss in the period in which they are incurred.
Inventories
Inventories are valued at the lower of cost and net realisable value. Costs
which includes appropriate labour and overhead absorption is calculated on the
basis of costs of purchase on a first in, first out basis. Net realisable value
is based on estimated selling price less further costs to completion and
disposal.
Lease and hire purchase contracts
Assets held under finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased items, are
capitalised at the inception of the lease, with a corresponding liability being
recognised for the lower of the fair value of the leased asset and the present
value of the minimum lease payments. Lease payments are apportioned between the
reduction of the lease liability and finance charges in the income statement so
as to achieve a constant rate of interest on the remaining balance of the
liability. Assets held under finance leases are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
Leases where the lessor retains a significant portion of the risks and benefits
of ownership of the asset are classified as operating leases and rentals payable
are charged to the income statement on a straight line basis over the lease
term.
Foreign currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("functional currency"). The consolidated financial statements
are presented in sterling, which is the Group's functional and presentational
currency.
Foreign currency transactions of individual companies are translated at the
rates ruling when they occurred. Foreign currency monetary assets and
liabilities are translated at the rates at the balance sheet date. Any
differences are taken to the income statement.
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. Income and expenses are
translated at weighted average exchange rates for the year. The resulting
exchange differences are taken directly to a separate component of equity.
Exchange differences on loans to overseas subsidiary undertakings which are
treated as being similar to equity funding, are taken directly to reserves
together with the exchange difference on the net investment in those
enterprises.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
Research and development
Research expenditure is recognised in the income statement in the year in which
it is incurred.
Expenditure relating to clearly defined and identifiable development projects is
recognised as an intangible asset only after all the following criteria are met:
* The project's technical feasibility and commercial viability can be
demonstrated;
* The availability of adequate technical and financial resources and an
intention to complete the project have been confirmed; and
* The correlation between development costs and future revenues has been
established.
Any intangible assets relating to product development (both internally generated
and externally acquired) are subject to impairment testing at each balance sheet
date. All intangible assets are tested for impairment when there are indications
that the carrying value may not be recoverable. Any impairment losses are
recognised immediately in the income statement.
Taxation
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and laws
that are enacted or substantively enacted by the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in
the financial statements, with the following exceptions:
* Where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
* In respect of taxable temporary differences associated with
investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future; and
* Deferred taxation assets are recognised only to the extent that it is
probable that there will be suitable taxable profits from which the future
reversal of the underlying temporary differences can be deducted.
Deferred taxation is measured on an undiscounted basis at the taxation rates
that are expected to apply in the periods in which temporary differences
reverse, based on taxation rates and laws enacted or substantively enacted at
the balance sheet date.
Share capital
Ordinary shares are classified as equity.
Incremental transaction costs directly attributable to the issue of equity are
accounted for as a deduction from equity, net of any related income tax benefit.
Government grants
Grants relating to expenditure on tangible fixed assets are credited to the
income statement at the same rate as the depreciation on the assets to which the
grants relate. The deferred element of grants is included in creditors as
deferred income. Grants of a revenue nature are credited to the income statement
in the period in which the expenditure to which the grant relates is incurred.
Share based payments
The Group operates a number of employee share schemes and issues equity settled
share based payments to certain employees.
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date at which they are granted and is recognised as an
expense over the vesting period, which ends on the date on which the relevant
employees become fully entitled to the award. Fair value is determined by an
external valuer using an appropriate pricing model. In valuing equity-settled
transactions, no account is taken of any vesting conditions, other than
conditions linked to the price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions and of
the number of equity instruments that will ultimately vest or, in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original awards terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any cost not yet recognised in the income
statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted
from equity, with any excess over fair value being treated as an expense in the
income statement.
Employee Benefits
The Group operates a defined contribution pension scheme for the benefits of
certain employees. The Group also contributes to certain employees' personal
pension plans. The pension cost charge to the income statement represents
pension contributions payable by the Group in the period.
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior periods.
Cash and cash equivalents
Cash and cash equivalents principally comprise cash and short term deposits held
with banks and other financial institutions with an original maturity of three
months or less.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. Should an amount become uncollectible
it is written off to the income statement in the period in which it is
identified.
Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, when it is probable that an outflow of
resources will be required to settle the obligation and when the amount has been
reliably estimated.
Interest bearing loans and borrowings
All interest-bearing loans are initially recognised at fair value of the
consideration received net of issue costs associated with the borrowing. After
initial recognition interest bearing loans and borrowings are subsequently
measured at amortised cost under the effective interest rate method.
Exceptional items
The Group presents as exceptional items on the face of the income statement,
those material items of income and expense which, because of the nature and
expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the year, so as to facilitate comparison with prior
periods and to assess better trends in financial performance.
New standards and interpretations not applied
IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these interim financial statements:
International Accounting Standards (IAS/IFRSs) Effective date
IFRS 8 Operating Segments 1 January 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Plans 1 January 2008
IFRIC 14 The Limit on a Defined Benefit Asset Minimum 1 January 2008
Funding Requirement and their Interaction
The Directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Group's financial statements
in the period of initial application.
2. Critical accounting policies, judgements and estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported for assets and liabilities as
at the balance sheet date and the amounts reported for revenues and expenses
during the year. The nature of estimation means that actual outcomes could
differ from those estimates. Key sources of estimation uncertainty and
critical accounting judgements are as follows:
Deferred taxation:
In the preparation of the financial statements, the Group estimates the income
taxes in each of the taxing jurisdictions in which the Group operates as well as
any deferred taxes based on temporary differences. Deferred tax assets relating
to tax loss carry-forwards and temporary differences are recognised in those
cases when future taxable income is expected to permit the recovery of those tax
assets. Changes in assumptions in the projections of future taxable income as
well as changes in tax rates could result in significant differences in the
valuation of deferred taxes.
Goodwill and intangibles:
The measurement and impairment of indefinite life intangible assets (including
goodwill) are key sources of estimation uncertainty that have a risk of causing
adjustment to the carrying amounts of assets and liabilities within the next
financial year.
The measurement of intangible assets other than goodwill on a business
combination involves estimation of future cash flows and the selection of a
suitable discount rate. The Group determines whether indefinite life intangible
assets are impaired on an annual basis and this requires an estimation of the
value in use of the cash generating units to which the intangible assets are
allocated. This involves estimation of future cash flows and choosing a
suitable discount rate.
Share-based payments:
The estimation of share-based payment costs requires the selection of an
appropriate valuation model, consideration as to the inputs necessary for the
valuation model chosen and the estimation of the number of awards that will
ultimately vest, inputs for which arise from judgements relating to the
continuing participation of employees.
3. Segmental analysis
The primary segment reporting format is determined to be business segments as
the Group's risks and returns are affected predominantly by differences in the
products and services provided. Secondary segment information is reported
geographically.
The Group operates in two business segments which reflect the risks and returns
inherent in the two segments and the internal organisation and management
structure of the Group. These segments are Molecular Diagnostics (MD) and
Research Products and Services (RPS)
Business Segments
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December
2006
#'000 #'000 #'000
Research Products and Services 3,851 3,476 7,275
Molecular Diagnostics 5,171 4,688 8,881
Total revenue 9,022 8,164 16,156
Geographical Segments
6 months ended 30 June 2007
Research Molecular Total
Products and Diagnostics
Services
#'000 #'000 #'000
UK 2,286 540 2,826
Rest of Europe 1,024 1,500 2,524
US 269 2,355 2,624
Asia 25 381 406
Rest of World 247 395 642
Total revenue 3,851 5,171 9,022
6 months ended 30 June 2006
Research Molecular Total
Products and Diagnostics
Services
#'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
Total revenue 3,476 4,688 8,164
Year ended 31 December 2006
Research Molecular Total
Products and Diagnostics
Services
#'000 #'000 #'000
UK 3,888 740 4,628
Rest of Europe 2,452 1,654 4,106
US 663 4,281 4,944
Asia 73 1,626 1,699
Rest of World 199 580 779
Total revenue 7,275 8,881 16,156
4. Exceptional items
6 months ended 6 months ended Year ended
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Settlement of unfair dismissal claim - (122) (122)
On 24 May 2006, the Group settled the unfair dismissal claim which had been
brought by Mr G P Ffoulkes-Davies, the former Group Finance Director following
the termination of his employment contract in November 2005. The #122,000
charge reflects the settlement made in excess of the provision made in 2005 as
well as associated legal costs incurred.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing net profits
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period (adjusted for the
effects of dilutive options and warrants).
Continuing operations 6 months 6 months ended Year ended 31
ended 30 June 2006 December 2006
30 June 2007 #'000 #'000
#'000
Earnings attributable to ordinary 520 (56) 368
shareholders
Number Number Number
000's 000's 000's
Basic weighted average number of 230,211 215,436 222,884
ordinary shares
Dilutive effect of:
- employee share options 2,166 - 1,222
- warrants 15,507 - 227
Diluted weighted average number 247,884 215,436 224,333
of shares
Basic earnings/(loss) per share 0.23p (0.03)p 0.17p
Diluted earnings/(loss) per share 0.21p (0.03)p 0.16p
6. Reconciliation of movements in equity
Equity Share Foreign Retained
Capital Exchange
Reserve Earnings
#'000 #'000 #'000
At 1 January 2006 35,733 - (30,040)
Total recognised income and expense - (19) (56)
Share-based payments - - -
Shares issued, net of issue costs 1,166 - -
At 30 June 2006 36,899 (19) (30,096)
Total recognised income and expense - (39) 424
Share-based payments - - 25
Shares issued, net of issue costs (21) - -
At 31 December 2006 36,878 (58) (29,647)
Total recognised income and expense (14) 520
Share-based payments 36
At 30 June 2007 36,878 (72) (29,091)
7. Additional financial information
30 June 30 June 31 December 2006
2007 2006
#'000 #'000 #'000
Operating profit/(loss) 503 (46) 277
Exceptional items - 122 122
Depreciation 264 263 509
Amortisation 6 6 11
EBITDA pre exceptional items 773 345 919
8. Foreign currency
The principal exchange rates used were as follows:
6 months ended 6 months ended Year end
30 June 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
US dollar - average 1.97 1.79 1.84
- closing 2.00 1.82 1.96
Euro - average 1.48 1.46 1.47
- closing 1.49 1.45 1.49
2007 results compared with 2006 at constant 2006 exchange rates
6 months ended 6 months ended
30 June 30 June
2007 2006
Revenue #'000 #'000 % change
Research Products and Services 3,875 3,476 11%
Molecular Diagnostics 5,489 4,688 17%
Total revenue 9,364 8,164 15%
9. Analysis of net funds
1 January Cash flow Non-cash movement 30 June
2007 2007
#'000 #'000 #'000 #'000
Cash and cash equivalents (i) 3,657 (1,474) (3) 2,180
Loans (1,234) - - (1,234)
Finance leases (161) 40 (126) (247)
Net funds 2,262 (1,434) (129) 699
i) Cash held in Escrow
Cash of #200,000 is held in an Escrow account in respect of the building of the
new laboratories in Livingston, Scotland. This amount will be used to satisfy
the final milestone payments in respect of the construction contract. This
amount is treated as cash in the Group balance sheet but treated as investment
in fixed deposit in the cash flow statement and net funds note.
10. Transition to IFRS
Application of IFRS 1 - First Time Adoption of IFRS
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial statements in accordance with UK GAAP.
The Group's financial statements for the year ended 31 December 2007 will be
first annual financial statements that comply with IFRS. These interim
financial statements have been prepared as described in note 1 and in accordance
with the accounting policies outlined in note 1. The Group's date of transition
to IFRS is 1 January 2006 and all comparative information in the financial
statements is restated to reflect the Group's adoption of IFRS except where
otherwise required or permitted under IFRS 1.
In preparing these interim financial statements in accordance with IFRS 1, the
Group has taken advantage of certain optional exemptions from full retrospective
application of IFRS as detailed below.
a) Business combinations
IFRS 3 'Business Combinations' has not been applied to acquisitions of
subsidiaries that occurred before 1 January 2006;
b) Cumulative translation differences
Cumulative foreign exchange translation differences have been set to zero as at
the date of 1 January 2006;
Impact of IFRS and reconciliation to UK GAAP
The impact of the transition to IFRS on the profit/(loss) for the 6 months ended
30 June 2006 and year ended 31 December 2006 and on equity as at 1 January 2006,
30 June 2006 and 31 December 2006 are set out in the reconciliations below.
The transition to IFRS has no effect on the cash flows of the Group but there
are certain presentational differences in the cash flow statement under IFRS and
UK GAAP.
The adjustments recognised as a result of the implementation of IFRS are
detailed below:
a) Goodwill and amortisation
Under UK GAAP, the Group amortised goodwill over its useful economic
life. IFRS 3 requires that goodwill is not amortised but is subject to an annual
impairment review instead. As required by IFRS1, an impairment test was carried
out at the date of transition to IFRS. No impairment was identified and no
adjustment to the carrying value of goodwill was made. The adjustments to the
Group balance sheets as at 30 June 2006 and 31 December 2006 were #101,000 and
#207,000 respectively relating to an increase in goodwill and in reserves, being
the amortisation of goodwill that was charged during those periods under UK
GAAP.
b) Foreign exchange
Translation differences arise from the consolidation of results of
foreign operations at average rate and the balance sheet at the year end rate of
exchange. Under UK GAAP, the Group was not required to separately record such
cumulative translation differences or to account for them in subsequent
disposals of foreign operations. Under IFRS, the translation differences
arising are separately recorded in equity. On disposal of a foreign operation,
the cumulative translation differences for that foreign operation will be
transferred to the income statement as part of the gain or loss on disposal.
Under IFRS 1, the Group has taken advantage of the option to reset
cumulative translation differences to zero at 1 January 2006 and adjustments
have been made to show the effect on reserves and equity for the 6 months ended
30 June 2006 and the year ended 31 December 2006 for translation differences of
#19,000 and #58,000 respectively arising since 1 January 2006.
c) Short term compensated absences
Under IAS 19, an accrual must be made for any short term compensated absences
accrued but not used at the balance sheet date. The reduction in net assets at
1 January 2006, 30 June 2006 and 31 December 2006 were #36,000, #100,000 and
#44,000 respectively.
d) License fees and patent costs
This relates to the capitalisation and subsequent amortisation of patent costs
and license fees under IAS 38. The increases in net assets at 1 January 2006, 30
June 2006 and 31 December 2006 were #45,000, #39,000 and #39,000 respectively.
Reconciliation of loss at 30 June 2006
UK GAAP Effect of IFRS
transition to
in IFRS format IFRS
#'000 #'000 #'000
Continuing operations
Revenue 8,164 - 8,164
Cost of sales (4,009) - (4,009)
Gross profit 4,155 - 4,155
Selling and distribution costs (1,354) - (1,354)
Research and development costs (895) - (895)
Administrative expenses - normal(i), (ii), (iii) (1,861) 31 (1,830)
- exceptional (122) - (122)
Total administrative expenses (1,983) 31 (1,952)
Operating loss (77) 31 (46)
Finance income 35 - 35
Finance expense (81) - (81)
Loss before taxation (123) 31 (92)
Tax credit 36 - 36
Loss for the period (87) 31 (56)
Operating profit before exceptional items 45 31 76
Notes to reconciliation of loss for 30 June 2006
#'000
(i) Goodwill amortisation 101
(ii) License fees and patent costs (6)
(iii) Short term compensated absences (64)
31
Reconciliation of profit at 31 December 2006
UK GAAP Effect of IFRS
transition to
in IFRS format IFRS
#'000 #'000 #'000
Continuing operations
Revenue 16,156 - 16,156
Cost of sales (7,663) - (7,663)
Gross profit 8,493 - 8,493
Selling and distribution costs (2,655) - (2,655)
Research and development costs (1,775) - (1,775)
Administrative expenses - normal(i), (ii), (iii) (3,857) 193 (3,664)
- exceptional (122) - (122)
Total administrative expenses (3,979) 193 (3,786)
Operating profit 84 193 277
Finance income 80 - 80
Finance expense (143) - (143)
Profit before taxation 21 193 214
Tax credit 154 - 154
Profit for the year 175 193 368
Operating profit before exceptional items 206 193 399
Notes to reconciliation of profit for 31 December 2006
#'000
(i) Goodwill amortisation 207
(ii) License fees and patent costs (6)
(iii) Short term compensated absences (8)
193
Reconciliation of equity at 1 January 2006 (date of transition to IFRS)
UK GAAP Effect of IFRS
transition to
in IFRS format IFRS
#'000 #'000 #'000
Non-current assets
Property, plant and equipment 1,500 - 1,500
Intangible assets (i) 1,665 45 1,710
3,165 45 3,210
Current assets
Inventories 2,247 - 2,247
Trade and other receivables 3,065 - 3,065
Income tax receivable 75 - 75
Cash and short term deposits 2,279 - 2,279
7,666 - 7,666
Total assets 10,831 45 10,876
Current liabilities
Trade and other payables (ii) (4,819) (36) (4,855)
Income tax payable (118) - (118)
Provisions (190) - (190)
(5,127) (36) (5,163)
Non-current liabilities
Financial liabilities (20) - (20)
Total liabilities (5,147) (36) (5,183)
Net assets 5,684 9 5,693
Capital and reserves
Equity share capital 35,733 - 35,733
Retained earnings (30,049) 9 (30,040)
Total equity 5,684 9 5,693
Notes to the reconciliation of equity at 1 January 2006
#'000
(i) License fees and patent costs 45
(ii) Short term compensated absences (36)
9
Reconciliation of equity at 31 December 2006 (date of last UK GAAP Financial
Statements)
UK GAAP Effect of IFRS
transition to
in IFRS format IFRS
#'000 #'000 #'000
Non-current assets
Property, plant and equipment 2,246 - 2,246
Intangible assets (i), (iii) 1,590 246 1,836
Deferred tax asset 104 - 104
3,940 246 4,186
Current assets
Inventories 2,645 - 2,645
Trade and other receivables 3,051 - 3,051
Income tax receivable 88 - 88
Cash and short term deposits 3,857 - 3,857
9,641 - 9,641
Total assets 13,581 246 13,827
Current liabilities
Trade and other payables (ii) (5,064) (44) (5,108)
Financial liabilities (88) - (88)
Income tax payable (151) - (151)
(5,303) (44) (5,347)
Non-current liabilities
Financial liabilities (1,307) - (1,307)
Total liabilities (6,610) (44) (6,654)
Net assets 6,971 202 7,173
Capital and reserves
Equity share capital 36,878 - 36,878
Foreign exchange reserve (iv) - (58) (58)
Retained earnings (29,907) 260 (29,647)
Total equity 6,971 202 7,173
Notes to reconciliation of equity at 31 December 2006
#'000
(i) Goodwill amortisation 207
(ii) Short term compensated absences (44)
(iii) License fees and patent costs 39
202
(iv) Movement of foreign exchange reserve from retained earnings (58)
Reconciliation of equity at 30 June 2006
UK GAAP Effect of IFRS
transition to
in IFRS format IFRS
#'000 #'000 #'000
Non-current assets
Property, plant and equipment 1,679 - 1,679
Intangible assets (i), (iii) 1,630 140 1,770
3,309 140 3,449
Current assets
Inventories 2,745 - 2,745
Trade and other receivables 3,782 - 3,782
Income tax receivable 37 - 37
Cash and short term deposits 2,893 - 2,893
9,457 - 9,457
Total assets 12,766 140 12,906
Current liabilities
Trade and other payables (ii) (5,769) (100) (5,869)
Financial liabilities (42) - (42)
Income tax payable (119) - (119)
(5,930) (100) (6,030)
Non-current liabilities
Financial liabilities (92) - (92)
Total liabilities (6,022) (100) (6,122)
Net assets 6,744 40 6,784
Capital and reserves
Equity share capital 36,899 - 36,899
Foreign exchange reserve (iv) - (19) (19)
Retained earnings (30,155) 59 (30,096)
Total equity 6,744 40 6,784
Notes to reconciliation of equity at 30 June 2006
#'000
(i) Goodwill amortisation 101
(ii) Short term compensated absences (100)
(iii) License fees and patent costs 39
40
(iv) Movement of foreign exchange reserve from retained earnings (19)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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