RNS Number:2180I
Genetix Group PLC
04 March 2003
Genetix Group plc announces Preliminary Financial Results
for the year ended 31 December 2002
New Milton, UK, 4 March 2003 - Genetix Group plc (LSE:GTX), the genomics and
proteomics technology group, today announces its preliminary financial results
for the year ended 31 December 2002.
Financial Highlights
* Sales #12.6 million (2001: #12.4 million)
* Pre-tax profit (excluding goodwill) #2.3 million (2001: #2.6 million)
* Strategic investment in R&D of #1.5 million (2001: #1.2 million)
* Sales of consumables and services up 15%
* Cash balance of #20.9 million (after share re-purchase of #1.4m)
Operational Highlights
* Doubling of direct sales team in US, UK, Germany and appointment of new
distributors in key territories
* Successful launch of new products including aQuire microarray scanner
and continued enhancement of existing products
* US sales up 12%, accounting for 52% of turnover
* Prestigious LINK grant awarded for protein mapping research - first
prototype built
Mark Reid, Chief Executive, commented:
"Genetix enjoyed a strong end to the year. Despite unpredictable market
conditions and continuing caution among our core client base, we continued to
increase sales and to invest strategically in marketing and R&D, the keys to our
long-term success. The actions taken in 2002 put Genetix in a stronger position
to take full advantage of the eventual upturn in the economic climate."
Enquiries:
Genetix Group plc
Mark Reid, Chief Executive
Gary Corsi, Finance Director
Tel: 01425 624600
Financial Dynamics
Jonathan Birt/Francetta Carr
Tel: 020 7831 3113
The release will be available on the Company's website: www.genetix.com
Notes to Editors
About Genetix Group plc
Genetix Group plc is leading developer of automated systems for the
understanding of systems biology. Genetix made a significant contribution to
the Human Genome Project by supplying high-throughput equipment to seven of the
leading eight laboratories in the consortia. Genetix, through its R&D expertise
and scientific resource, is committed to the continual development of innovative
solutions to accelerate the rate of global scientific discovery. Genetix is
quoted on the London Stock Exchange and is based in New Milton, Hampshire, UK.
Review of operations
Over the last two years, the biotechnology industry has undergone a period of
volatility, marked by industry consolidation, cutbacks in expenditure and a
perception that new technologies have failed to deliver the promised
breakthroughs in drug discovery. This has led to funding difficulties being
experienced by many loss-making companies. As a provider of equipment,
consumables and services to this industry, Genetix has proactively managed the
business during the downturn in market conditions and we have worked hard in
2002 to balance our objectives of increasing market share, strengthening our
sales force, and raising R&D spending, while maintaining profitability and cash
flow. We achieved a creditable performance in the face of challenging market
conditions and remain one of the few consistently profitable companies in our
field.
Genetix achieved a turnover of #12.6 million in 2002, slightly higher than that
reported for the previous year, despite difficult trading conditions. Profit
before tax was #2.0 million compared to #2.2 million last year, the reduction
largely being attributable to increasing investment in key areas of the
business. We believe that Genetix has emerged as a stronger company with a
blend of know-how, products and technologies that will keep it at the forefront
in providing our customers with solutions for systems biology in the years
ahead. We remain financially strong and able to invest in opportunities that
add value to the business.
During the year we have been preparing for the future through intense R&D
activity, sales recruitment and new product sales. The R&D team focused on
developing our new range of scanners, liquid handling capability, wellplate
handling and new proteomics techniques for measuring protein-protein
interactions. In sales, we expanded our teams in the US, UK and Germany and
established our new base in Boston, at the heart of the biotechnology region on
the East Coast of the US. New products were successfully introduced and
feedback has been encouraging, particularly for our scanning and benchtop
microarraying instruments.
In July, our growing position in proteomics was strengthened by the award of a
research grant to develop and build a verified human protein-protein interaction
map in collaboration with the Medical Research Council's Human Genome Mapping
Project Resource Centre. This highly prestigious award recognises our expertise
in this field and we look forward to working closely with our academic partners
in helping to advance the medical benefits that this knowledge will provide.
Notwithstanding unpredictable market conditions, Genetix continues to operate
from a position of strength from which to grow the business. This, together
with a programme of new initiatives aimed at increasing sales, means that
Genetix faces the future with confidence.
The Group remains both profitable and cash generative.
Sales and marketing
During the year we doubled the direct sales team operating in the US, UK and
Germany. In addition we:
- opened a new US office in Boston;
- moved our German sales office from Heidelberg to Munich; and
- appointed new distributors in Australia, Italy and the Czech Republic.
Product launches
During 2002, the main focus was on developing and launching our new microarray
scanner, improving our benchtop microarraying instrument and refining our
high-throughput stacking technology which is used on many of our existing
products. Several new proteomics products were developed and these will be
formally launched in 2003. The main product initiatives were:
* aQuire scanner, developed throughout the year and launched in the last
quarter of 2002, this highly sensitive and cost-effective instrument
enables Genetix to offer a complete solution for producing and analysing
microarrays;
* QArrayMini, now includes a number of new features which extend the
product into new markets;
* stacking systems, new improved modular design that can enhance the
throughput of Genetix instruments;
* aliQuot, prototype of new automatic micro-dispensing filler which has
potential applications across a variety of areas including
pharmaceuticals;
* liquid handling, developed for the QBot and adaptable to other Genetix
platforms; and
* several customised products were made for customers using novel
techniques, enhancing our knowledge of specialist applications.
Research and Development
This was a year of investment in R&D. Expenditure rose by 32% to #1.5 million
(#1.4 million after LINK grant recovery), with 26% of the workforce now in this
area. Proportionately, gross R&D expenditure represented just over 12% of sales
and is expected to remain around this level in the short-term. The Group's links
with academic institutions remain strong and our reputation for developing novel
solutions for systems biology is growing, as evidenced by a number of special
projects undertaken during the year. The team's skills base broadened
significantly, particularly in the field of proteomics, imaging and data
handling.
Our growing position in proteomics was strengthened by the award of the LINK
grant. The collaboration is aimed at enabling the mapping of all human
protein-protein interactions to be undertaken with a high degree of accuracy and
in considerably less time than is currently possible, helping to bring forward
the medical benefits of this knowledge. We have built our first prototype
instrument and are about to start the first phase of detailed testing with MRC
early in 2003.
Outlook
Throughout 2002 we experienced unpredictable trading with significant variations
in order placement. The market remains unchanged and given the current
macroeconomic uncertainties, we do not anticipate an early improvement in
trading. The actions taken in 2002 will put Genetix in a stronger position when
the economic climate eventually improves and we will continue to focus on our
strategy of growth in anticipation of these medium-term opportunities. We
remain cautious about prospects for 2003 but positive about the longer-term and
the variety of opportunities in our areas of interest.
Financial review
Results
Group turnover was up 1% at #12.6 million (2001: #12.4 million); Instrumentation
accounted for 72% (2001: 75%) and Consumables and Services 28% (2001: 25%) of
total sales. The growth in turnover was achieved by a strong performance from
consumables and services which grew 15% over the year; instrumentation sales
were 3% lower than 2001.
The Group's gross margin was 50% compared to 46% in 2001 reflecting tight
control of direct costs and a favourable exchange gain on US dollar forward
contracts.
Gross R&D expenditure increased by 32% to #1.5 million (2001: #1.2 million);
after taking credit for LINK grant recoveries of #0.1 million, the net spend was
#1.4 million.
Sales and administrative expenses (excluding goodwill) increased as a percentage
of sales mainly due to the costs of expanding the sales force in the US, UK and
Germany. Overall, the Group's operating margin was 12% (excluding goodwill),
compared to 13% in 2001.
Included within operating expenses are goodwill amortisation costs of #0.4
million (2001: #0.4 million).
Net interest receivable was #0.8 million (2001: #1.0 million), a significant
reduction compared to 2001 due to lower interest rates.
The Group's effective tax rate was 30.0% (2001: 33.7%) and will be maintained at
this rate for 2003 because of the ongoing benefit of the UK government's R&D tax
credit scheme.
Earnings per share were 1.76p (2001: 1.91p) based on a weighted average of
77,445,689 shares in issue during 2002. Adjusted earnings per share (excluding
goodwill) were 2.23p (2001: 2.38p).
Staff numbers remained broadly the same as last year and we now employ 103
people worldwide.
Cash flow
The Group generated cash of #2.1 million (before financing items, including
exchange gains); after financing the share buy-back of #1.4 million, cash
increased by #0.7 million to end the year at #20.9 million (2001: #20.2
million).
Cash from operating activities was #1.2 million reflecting an increase in
working capital requirements compared to 2001; stock levels fell by #0.3m
compared to last year; debtors increased by #0.5 million primarily reflecting
higher sales in the last quarter of 2002 compared to the same period last year.
Overall, working capital represented 15% of sales.
The Group paid tax of #0.4 million but received tax refunds of #0.4 million,
leaving the net position neutral (2001: #1.1 million tax paid).
Capital expenditure was #0.4 million (2001: #0.8 million) of which #0.1 million
was on patents.
Following the passing of a Special Resolution at an Extraordinary General
Meeting, the Company purchased and cancelled 4,850,000 ordinary shares of 50p at
an average price of 28p.
Exchange rates
The results of the Group's US and German subsidiaries were translated into
sterling at average exchange rates of #/$ 1.5089 and #/Euro 1.5895 respectively;
the balance sheets were translated at the year end exchange rates of #/$ 1.6099
and #/Euro 1.5342.
Consolidated profit and loss account
for the year ended 31 December 2002
Before Total Total
goodwill Goodwill 2002 2001
#000 #000 #000 #000
Turnover - continuing operations 12,572 - 12,572 12,419
Cost of sales (6,255) - (6,255) (6,742)
_____ _____ _____ _____
Gross profit 6,317 - 6,317 5,677
Research & development (1,448) - (1,448) (1,179)
Sales & administrative expenses (3,356) - (3,356) (2,893)
Amortisation of goodwill - (362) (362) (362)
_____ _____ _____ _____
Total administrative expenses (4,804) (362) (5,166) (4,434)
_____ _____ _____ _____
Operating profit - continuing operations 1,513 (362) 1,151 1,243
Net interest receivable 799 - 799 990
_____ _____ _____ _____
Profit on ordinary activities before taxation 2,312 (362) 1,950 2,233
Tax on profit on ordinary activities (585) - (585) (752)
_____ _____ _____ _____
Profit for the financial year 1,727 (362) 1,365 1,481
_____ _____ _____ _____
Earnings per share 2.23p (0.47p) 1.76p 1.91p
_____ _____ _____ _____
Diluted earnings per share 2.11p (0.44p) 1.67p 1.85p
_____ _____ _____ _____
Consolidated balance sheet
at 31 December 2002
2002 2001
#000 #000
Fixed assets
Intangible assets 6,826 7,190
Tangible assets 2,329 2,348
Investments 1 3
_____ _____
9,156 9,541
_____ _____
Current assets
Stocks 1,522 1,777
Debtors 2,255 1,776
Cash at bank and in hand 20,867 20,142
______ ______
24,644 23,695
Creditors: amounts falling due within one year (2,654) (2,325)
______ ______
Net current assets 21,990 21,370
______ ______
Total assets less current liabilities 31,146 30,911
Provisions for liabilities and charges (401) (158)
______ ______
Net assets 30,745 30,753
______ ______
Capital and reserves
Share capital 36,349 38,422
Shares to be issued - 1,000
Share premium account 16,376 15,707
Capital redemption reserve 2,425 -
Merger reserve (29,686) (29,686)
Profit and loss account 5,281 5,310
______ ______
Equity shareholders' funds 30,745 30,753
______ ______
Consolidated cash flow statement
for the year ended 31 December 2002
2002 2001
#000 #000
Net cash inflow from operating activities 1,234 2,136
______ ______
Returns on investments and servicing of finance
Interest received 808 1,010
Interest paid (9) (20)
______ ______
799 990
______ ______
Taxation
Corporation tax refund 364 -
Corporation tax paid (351) (1,102)
______ ______
13 (1,102)
______ ______
Capital expenditure and financial investment
Purchase of tangible fixed assets (289) (364)
Purchase of intangible fixed assets (61) (394)
Sale of tangible fixed assets - 894
______ ______
(350) 136
______ ______
Acquisitions
Purchase of subsidiary undertakings - (67)
______ ______
- (67)
______ ______
Net cash inflow before use of liquid resources and financing 1,696 2,093
______ ______
Financing
Issue of share capital (net of expenses) 21 4
Share capital re-purchased (including expenses) (1,366) -
Decrease in debt - (1,699)
______ ______
Net cash outflow from financing (1,345) (1,695)
______ ______
Increase in cash 351 398
______ ______
Consolidated statement of total recognised gains and losses
for the year ended 31 December 2002
2002 2001
#000 #000
Profit for the financial year 1,365 1,481
Currency translation differences on foreign currency net investments (28) 3
____ ____
Total recognised gains and losses for the year 1,337 1,484
____ ____
Reconciliation of movements in consolidated shareholders' funds
for year ended 31 December 2002
2002 2001
#000 #000
Profit for the financial year 1,365 1,481
Currency translation differences (28) 3
Share capital issued (net of costs) 21 4
Share capital re-purchased (including fees) (1,366) -
_______ ______
Net movement in shareholders' funds (8) 1,488
Opening shareholders' funds 30,753 29,265
______ ______
Closing shareholders' funds 30,745 30,753
______ ______
Preliminary Announcement 2002
Notes to the financial statements
1. Preparation of financial statements
The presentation of information before goodwill amortisation has been shown
because the directors consider that this gives a useful indication of underlying
performance.
The financial information contained in the preliminary announcement does not
constitute the Group's statutory results for the year ended 31 December 2002 or
2001. The above figures for the year ended 31 December 2002 are an abridged
version of the Group's audited accounts which have been reported on by the
Group's auditors and for which an unqualified audit report has been issued. The
auditors' report did not contain statements under s237(2) or (3) Companies Act
1985. The full annual report and accounts will be posted to shareholders
shortly and the Annual General Meeting will be held on 25 April 2003. The
statutory accounts for 2002 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
Financial Reporting Standard 19 "Deferred Taxation" has been adopted during the
year giving rise to an immaterial current year tax charge relating to prior
years of #36,000.
The preliminary announcement was approved by the Board on 4 March 2003.
2. Turnover
In the opinion of the directors, the Group operates only one class of business,
namely the provision of instrumentation, consumables and services for genomic
research. Turnover can be analysed as follows:
2002 2001
#000 #000
By geographic destination
UK 1,487 1,228
Rest of Europe 2,402 2,783
North America 6,565 5,883
Rest of World 2,118 2,525
______ ______
12,572 12,419
______ ______
The majority of turnover was generated in the United Kingdom with the exception
of Genetix Reagents Inc., segmental disclosure of which would be prejudicial to
the business in the United States.
3. Operating profit
2002 2001
#000 #000
Operating profit is stated after charging/(crediting):
Depreciation of owned assets 304 192
Amortisation of goodwill 362 362
Amortisation of patents and licences 63 14
Loss/(profit) on disposal of fixed assets 2 (49)
Auditors' remuneration:
services as auditors 36 33
tax compliance services 8 7
tax advisory services 55 49
consulting services - 55
Research and development (including salaries) 1,561 1,179
R&D LINK grant recovery (113) -
(Gain)/loss on foreign currency transactions (374) 61
_____ _____
4. Earnings per share
2002 2001
#000 #000
Profit for the financial year before amortisation of goodwill 1,727 1,843
Amortisation of goodwill (362) (362)
_____ _____
Profit for the financial year 1,365 1,481
_____ _____
No. 000 No. 000
Basic weighted average number of shares 77,446 77,511
Dilutive effect of share options 4,213 2,568
______ ______
Diluted weighted average number of shares 81,659 80,079
______ ______
Pence Pence
Earnings per share before amortisation of goodwill 2.23p 2.38p
_____ _____
Diluted earnings per share before amortisation of goodwill 2.11p 2.30p
_____ _____
Earnings per share 1.76p 1.91p
_____ _____
Diluted earnings per share 1.67p 1.85p
_____ _____
Earnings are calculated as profit after taxation for the year. Earnings per
share before amortisation of goodwill has been shown because the directors
consider that this gives a useful indication of underlying performance.
5. Notes to the cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating
activities
2002 2001
#000 #000
Operating profit 1,151 1,243
Depreciation 304 192
Amortisation 425 376
Loss/(profit) on sale of fixed assets 2 (49)
Decrease/(increase) in stocks 255 (725)
(Increase)/decrease in debtors (479) 1,096
Decrease in creditors (50) (58)
Exchange (gain)/loss on foreign currency (374) 61
_____ _____
Net cash inflow from operating activities 1,234 2,136
_____ _____
(b) Analysis of changes in net funds
At 1 At 31
January Cash Exchange December
2002 flow movement 2002
#000 #000 #000 #000
Cash at bank and in hand 20,142 351 374 20,867
______ _____ _____ ______
20,142 351 374 20,867
______ _____ _____ ______
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