8th September 2004
TEPNEL LIFE SCIENCES PLC
Interim results for the 6 months ended 30th June 2004
Manchester, U.K., September 8, 2004 Tepnel Life Sciences ("the Company") AIM:
TED is a UK-based international life sciences products and services company
targeting key areas within the biomedical research and food safety industries.
Summary
* Turnover for the Group increased to �5.07m (6 months to 30 June 2003: �
1.93m) including revenues from the newly acquired Tepnel Lifecodes (TLC)
and Tepnel Diagnostics (TD) businesses amounting to �2.98m (6 months to 30
June 2003 �nil)
* Pre-tax losses for the Group during the period were �0.92m (6 months to 30
June 2003: �1.00m) of which �0.57m is attributable to existing operations
(6 months to 30 June 2003: �1.00m) a decrease of 43%, and �0.35m is
attributable to the acquisitions during the period (6 months to 30 June
2003: �nil)
* Completion of acquisition of TLC/TD operations in January 2004 for $2.49m
* Dr Andrew Clark joins as non-executive director
* Cash and cash equivalents as at 30 June 2004 of �1.47m
* Funding agreement secured with Cornell Capital Partners Offshore L.P. for
up to �5.00m of expansion capital
Ben Matzilevich, Chief Executive Officer of Tepnel, said: "The first half of
2004 has been very successful for Tepnel. As we advised the market in May,
trading has been ahead of management expectations and the half-year results
demonstrate the revenue growth and reduction in losses that we have achieved.
Our purchase of the now renamed Tepnel Lifecodes and Tepnel Diagnostics
businesses has proven to be successful for all the reasons that the board
identified before the acquisition and we were able to reduce the purchase price
post-acquisition. The board is actively working to secure further growth as
illustrated by our planned acquisition of Diaclone Research. We wish to thank
our shareholders for their faith and support in our business model. We believe
that the second half of the year will continue to demonstrate top and bottom
line improvement and look forward to accelerated growth and profitability in
2005."
Ben Matzilevich, Chief Executive Office, Tepnel Life 0161 946 2200
Sciences PLC
Gron Ffoulkes-Davies, Finance Director, Tepnel Life 0161 946 2200
Sciences PLC
Mark Percy, Seymour Pierce Limited 0207 107 8000
Richard Anderson/Helena Podd, De Facto Communications plc 0207 940 1000
CHAIRMAN'S STATEMENT
Tepnel Life Sciences ("the Company")
Interim Results - 2004
Financial Results
In the six months ended 30 June 2004, turnover for the Group increased to �
5.07m (6 months to 30 June 2003: �1.93m) including revenues from the newly
acquired Tepnel Lifecodes (TLC) and Tepnel Diagnostics (TD) businesses
amounting to �2.98m (6 months to 30 June 2003: �nil). Revenues from existing
operations increased to �2.09m (6 months to 30 June 2003: �1.93m).
Pre-tax losses for the Group during the period were �0.92m (6 months to 30 June
2003: �1.00m) of which �0.57m is attributable to existing operations (6 months
to 30 June 2003: �1.00m), a decrease of 43%, and �0.35m is attributable to the
acquisitions during the period (6 months to 30 June 2003: �nil).
The loss per share has decreased to 0.6p (6 months to 30 June 2003: 1.0p).
Cash and equivalents at the end of the period were �1.47m.
During the period, Tepnel secured a funding agreement with Cornell Capital
Partners Offshore L.P. (Cornell) for up to �5m of expansion capital. In the 6
month period to 30 June 2004, �600k was drawn down from the facility. Of this
amount, �550k was satisfied by the issue of 4,765,070 shares at an average
price of 11.54 pence per share. At the period end, an amount of �50k was
outstanding which has subsequently been repaid in cash to Cornell.
Tepnel currently has no debt facilities and is currently in discussion with a
number of banks for the provision of debt facilities to the Group.
Overview
In the first six months of the year, the Group has made considerable progress
towards profitability. Financial performance from ongoing operations has
continued to improve at both the revenue and operating result lines to give
Tepnel the best six monthly financial performance in recent years. Further
progress is expected in the remainder of 2004 as the Group positions itself for
profitability in 2005.
The completion of the TLC and TD acquisition in January 2004 has brought
considerable benefits to Tepnel, including establishing the company in genetic
testing, significantly adding to the revenue stream by creating an important
North American sales capability and providing a sound base for future growth
and development.
The Group now sells a diverse range of products and services to its customer
base in the biomedical research and food safety industries, without being
dependent on one customer type or revenue stream.
Tepnel Life Sciences (TLS) - TLS provides complete solutions for DNA
purification including manual kits, automated systems and contract laboratory
services.
Revenues from DNA purification services during the first half of the year were
better than expected and considerably in excess of the corresponding period in
2003. The company has contracts in place for the remainder of 2004 and beyond.
Tepnel is presently increasing capacity in this area, through investment in
capital equipment and personnel, ensuring that growth momentum is sustained.
However, overall revenue growth has been limited by a delay in instrument sales
during the first half of the year. Software related issues that caused the
delays in sales have now been fully addressed and the company is confident of
resuming sales progress during the second half of the year.
Solid progress has been made in the sales of manual DNA purification kits
during the first half of the year with product launches and improvements
expected to contribute to further sales increases in the second half of the
year.
Losses from this division during the first half of the year have reduced
considerably compared to the same period last year. Further progress towards
profitability is expected during the second half of the year.
Tepnel BioSystems (TBS) - TBS develops, manufactures and markets the BioKits
range of food tests for allergens, toxins, GMOs, animal and fish speciation,
adulterants and contaminants. It also performs contract analysis services.
Revenue growth from this division in the first half of the year has been
constrained as the company has focused efforts and resources on developing the
allergen and toxin markets. However, this resource investment has resulted in
improved gross margins and operating profits compared to the same prior year
period.
Whilst TBS was profitable in the first half of the year, profitability was
impacted by the costs of initiating sales and marketing activities to the US
food safety market through the newly acquired TLC facility in Stamford,
Connecticut. Sales momentum is expected to build in the second half of the year
through a full six month contribution from this new distribution channel.
The board is confident that TBS will remain profitable and cash generative for
the year as a whole.
Tepnel Scientific Services (TSS) - TSS provides a wide range of analytical
chemistry, bioanalytical and microbiological services to the pharmaceutical,
biotechnology and healthcare industries.
TSS traded profitably and generated cash during the first half of the year.
Revenue growth was generated from microbiology and bioanalytical services
compared to the same prior year period whilst analytical chemistry sales
suffered from a high prior year comparative figure, although revenue was in
line with internal estimates. Further growth is expected in the second half of
the year particularly from already contracted revenue for the bioanalytical
unit.
The Group continues to finalise plans for a merger of TSS's existing Glasgow
and Edinburgh facilities into a custom built facility in Livingston and a
further announcement will be made at the appropriate time.
TSS is expected to trade profitably for the remainder of 2004.
Tepnel Lifecodes (TLC) and Tepnel Diagnostics (TD): Acquired in January 2004,
TLC/TD is a leading provider of diagnostic products and services in the field
of transplant immunology and genetic disease predisposition testing.
Trading at the newly acquired TLC/TD operations during the first half of the
year has been better than expected at the revenue level, but this has been
offset by downward pressure on margins. Integration of the business has
proceeded at a faster rate than anticipated whilst operating losses have been
in line with management expectations. Whilst TLC/TD is expected to be loss
making for 2004 as a whole, improved revenues and margins are expected later in
2004 as the integration programme brings further benefits.
Board Changes
Dr Andrew Clark joined the Board of Directors as an Independent Non-Executive
Director on 19 May 2004. Andrew brings with him a wealth of experience in
investment management from the life science sector, most recently as a
consultant for Reabourne Technology Investment Management Ltd which he
co-founded in 1995. The company manages the Finsbury Technology Trust, Finsbury
Life Sciences Investment Trust, Consulta Technology Fund and Close Finsbury
Universal Life Sciences Fund. Prior to this, he held several positions
including UK and European Biotechnology Analyst at Barings. Andrew earned his
PhD in Neuroscience from the University of St Andrews.
Prospects
The current financial year has started well for the Group. The TLC/TD
businesses acquired in January 2004 have now been successfully integrated into
the Group and we are now beginning to derive operating and financial benefits.
Further growth from operations is expected in the second half of the year,
including a full six month contribution from the TLC/TD acquisition.
The Group is expecting to complete the acquisition of Diaclone Research before
31 October 2004 and looks forward to the benefits that this acquisition will
bring to our diagnostic and service offerings in Europe and the U.S.
The company remains focused on profitability and shareholder value creation and
we look forward to updating investors on further progress in this area during
the remainder of the year.
Alec Craig
Non-Executive Chairman
8th September 2004
Consolidated Profit & Loss for 6 months ended 30 June 2004
6 months 6 months Audited 12 6 months
ended ended 18 months ended 31
30 June 30 June months ended December
2004 2003 ended 31 30 June 2002
December 2003
(note 1) (note 1) 2003 (note 1) (note 1)
Continuing operations
Acquisitions
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Turnover 2,982 2,086 5,068 1,933 5,676 3,738 1,805
Cost of sales 1,979 995 2,974 912 3,041 2,008 1,096
Gross profit 1,003 1,091 2,094 1,021 2,635 1,730 709
Research and 389 247 636 643 1,613 1,158 515
development
Sales and 672 322 994 371 1,295 840 469
marketing
Administrative 296 1,099 1,395 1,009 3,320 2,162 1,153
expenses
Administrative
expenses - 0 0 0 0 2,348 0 0
exceptional 2
Total
administrative 296 1,099 1,395 1,009 5,668 2,162 1,153
expenses
Total expenses 1,357 1,668 3,025 2,023 8,576 4,160 2,137
Operating loss (354) (577) (931) (1,002) (5,941) (2,430) (1,428)
Interest 26 26 100 80 54
receivable
Interest payable (17) (22) (41) (23) (1)
Loss on ordinary
Activities before (922) (998) (5,882) (2,373) (1,375)
taxation
Taxation 60 87 221 144 57
Loss on ordinary
activities after (862) (911) (5,661) (2,229) (1,318)
taxation
Basic and diluted loss 0.6* 1.0* 5.6p 2.3p 1.3p
per share
1 Neither audited or reviewed
2 Exceptional items comprise fixed asset impairment (�528k), goodwill
impairment (�1,642k) and foreign currency exchange loss (�178k)
Consolidated Balance Sheet for 6 months ended 30 June 2004
30 June Audited 30 June
2004 31 December 2003
(note 1) 2003 (note 1)
�'000 �'000 �'000
Fixed assets
Intangible assets 502 - 1,719
Tangible assets 1,933 1,171 1,843
2,435 1,171 3,562
Current assets
Stocks 2,245 995 841
Debtors - due within one year 3,357 1,481 1,198
Cash at bank and in hand 1,474 4,244 1,060
7,076 6,720 3,099
Creditors due within one year 4,003 1,859 1,354
Total assets less current liabilities 5,508 6,032 5,307
Creditors due after more than one (64) (137) (204)
year
Net assets 5,444 5,895 5,103
Capital and reserves
Called up share capital 1,385 1,337 973
Share premium account 30,788 30,438 26,578
Profit and loss account (26,729) (25,880) (22,448)
Equity shareholders' funds 5,444 5,895 5,103
All items under capital and reserves are equity.
Statement of Total Recognised Gains and Losses
6 months 6 Audited 12 months 6 months
ended 30 months 18 months ended 30 ended 31
June 2004 ended ended 31 June 2003 December
30 June December 2002
(note 1) 2003 2003 (note 1)
(note 1)
(note
1)
�'000 �'000 �'000 �'000 �'000
Loss for the period (862) (911) (5,661) (2,229) (1,318)
Currency translation
13 0 0 0 0
differences on foreign
currency net investments
Total gains and losses (849) (911) (5,661) (2,229) (1,318)
recognised
1 Neither audited or reviewed
Consolidated Cash Flow Statement for 6 months ended 30 June 2004
6 months 6 months Audited 12 months 6 months
ended 30 ended 30 18 months to 30 June to 31
June 2004 June 2003 to 31 2003 December
December 2002
(note 1) (note 1) 2003 (note 1)
(note 1)
�'000 �'000 �'000 �'000 �'000
Reconciliation of operating loss to net
cash outflow from operating activities
Operating loss (931) (1,002) (5,941) (2,430) (1,428)
Depreciation 324 153 1,022 304 151
Amortisation 0 35 1,783 66 31
Profit on disposal of fixed 0 1 0 1 0
assets
(Increase)/decrease in (1,250) 77 (155) (1) (78)
stocks
(Increase)/decrease in (1,876) 213 (73) 339 126
debtors
Increase/(decrease) in 2,344 (64) 255 23 87
creditors
Decrease in current asset 0 20 20 20 0
investments
Net cash outflow from (1,389) (567) (3,089) (1,678) (1,111)
operating activities
Consolidated cash flow
statement
Net cash outflow from (1,389) (567) (3,089) (1,678) (1,111)
operating activities
Return on investments 9 62 59 115 53
Acquisitions (see note 5) (1,967) 0 0 0 0
Corporation tax (98) (327) 323 0 327
Capital expenditure 342 (110) (223) (676) (566)
Net cash outflow before (3,103) 0 (2,930) (2,239) (1,297)
financing
Management of liquid 0 0 2,802 0 1,474
resources
Financing 333 0 3,875 0 0
(Decrease)/Increase in cash (2,770) (942) 3,747 (2,239) 177
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash (2,770) (942) 3,747 (2,239) 177
Cash outflow from short term 0 0 (2,802) 0 (1,474)
deposits
Cash outflow from decrease 65 149 250 170 21
in lease financing
Change in net funds (2,705) (793) 1,195 (2,069) (1,276)
resulting from cash flow
New finance leases 0 (1) (499) (487) (486)
Net funds/(debt) at 3,968 1,510 3,272 3,272 3,272
beginning of period
Net funds at end of period 1,263 716 3,968 716 1,510
1 Neither audited or reviewed
Notes
1. The Interim Report for the six months ended 30 June 2004 is unaudited and
was approved by the directors. The financial information set out above in
respect of the period ended 31 December 2003 has been extracted from the
previous published and audited statutory accounts and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The information for the comparative figures has been extracted from the
previously published interim and annual reports except for the six months ended
30 June 2003 which has been calculated as the difference between the results
shown in the interim report for the six months ended 31 December 2002 and the
12 months ended 30 June 2003. The Annual Report from which information for the
18 month period ended 31 December 2003 has been extracted has been delivered to
the Registrar of Companies and whilst the audit opinion was unqualified the
auditors included an explanatory paragraph regarding going concern.
2. The directors do not recommend the payment of an interim dividend.
3. The accounting policies used are consistent with those applied in the latest
published company accounts.
4. Segmental analysis
Audited 18 6 months
6 months 6 months months ended 31
ended 30 ended 30 ended 31 12 months December
June 2004 June 2003 December ended 30 2002
2003 June 2003
(note 1) (note 1) (note 1)
(note 1)
�'000 �'000 �'000 �'000 �'000
Turnover by geographical
destination
UK 1,951 1,525 4,137 2,797 1,272
Rest of Europe 932 286 831 528 242
Americas 1,811 76 472 182 106
Asia 5 20 156 116 96
Rest of the World 369 26 80 115 89
5,068 1,933 5,676 3,738 1,805
Turnover by
geographical origin
2,651 1,933 5,676 3,738 1,805
UK
2,417 0 0 0 0
Americas
5,068 1,933 5,676
3,738 1,805
5. Fair value of assets acquired
Tepnel Life Sciences PLC acquired Tepnel Lifecodes and Tepnel Diagnostics,
formerly Orchid Diagnostics on 21 January 2004.
In accordance with the accounting policies, this has been accounted for using
the acquisition method of accounting.
30 June 2004
Purchase of subsidiary
undertakings �'000
Tangible fixed assets 929
Stocks 1,276
Debtors 953
Prepayments & other 146
debtors
Cash at bank and in hand 13
Creditors (1,852)
1,465
Goodwill 502
Net assets acquired 1,967
less costs of (598)
acquisition
1,369
satisfied by:
Cash 1,369
Fair value of Book Fair value adjustments
assets acquired: Value
Revaluations Accounting Fair value
policy
alignment
�'000 �'000 �'000 �'000
Tangible fixed 1,897 0 (968) 929
assets
Stocks 1,395 0 (119) 1,276
Debtors 982 0 (29) 953
Prepayments & other 171 0 (25) 146
debtors
Cash at bank and in 13 0 0 13
hand
Creditors (1,748) 0 (104) (1,852)
2,710 0 (1,245) 1,465
6. Reconciliation of shareholders funds
Audited 18 6 months
6 months 6 months months ended 12 months ended 31
ended 30 ended 30 31 December ended 30 December
June 2004 June 2003 2003 June 2003 2002
(note 1) (note 1) (note 1) (note 1)
�'000 �'000 �'000 �'000 �'000
Loss for the (862) (911) (5,661) (2,229) (1,318)
period
Other recognised 13 0 0 0 0
gains and losses
relating to the
period (net)
New share capital 398 0 4,224 0 0
subscribed
Net additions to
shareholders' (451) (911) (1,437) (2,229) (1,318)
funds
At beginning of
period 5,895 6,014 7,332 7,332 7,332
At end of period 5,444 5,103 5,895 5,103 6,014
7. The basic loss per share has been calculated on the following basis:
Audited 18 6 months
6 months 6 months months 12 months ended 31
ended 30 ended 30 ended 31 ended 30 December
June 2004 June 2003 December June 2003
2003 2002
(note 1) (note 1) (note 1)
(note 1)
Loss for the period (862) (911) (5,661) (2,229) (1,318)
�'000
Weighted average No. 134,244,887 100,477,639 101,402,875 97,331,280 97,331,280
of shares
In the current period the average number of ordinary shares is the same on a
diluted basis.
8. 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 or reviewed
END
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