Bioquell Regulatory News (BQE)

19 Sep 2006 07:00

Bioquell PLC19 September 2006 TO: CITY EDITORSFOR IMMEDIATE RELEASE 19 September, 2006 BIOQUELL PLC Interim results 2006 BIOQUELL PLC, the UK leader in specialist bio-decontamination technology andtesting/compliance services, announces its interim results for the six monthsended 30 June 2006. The highlights are: FINANCIALS * group moves into profit * turnover £12.2 million (H1 2005: £7.0 million), a 74% increase (excluding acquisitions, organic revenue growth was 33%) * increase in gross margin to 38% (H1 2005: 34%), reflecting higher levels of bio-decontamination and service revenues * gross expenditure on product development £0.6 million (H1 2005: £0.6 million) * profit before tax of £0.4 million (H1 2005: loss before tax £0.7 million) * net cash from operating activities £0.9 million (H1 2005: £0.8 million) * capital expenditure £0.6 million (H1 2005: £0.5 million) * net debt £1.6 million (31 December 2005: £1.6 million) OPERATIONAL Bio-decontamination division * turnover £6.9 million (H1 2005: £4.7 million), organic growth of 47% * strong growth in bio-decontamination equipment and services, particularly in the UK and US * increased activity in the eradication of "superbugs" - in the UK and internationally * improved trading across all businesses in the bio-decontamination division, in particular from the defence business * good progress on the development of new wound healing technology TRAC (Testing, Regulatory and Compliance) division * turnover £5.2 million (H1 2005: £2.3 million), a 126% increase * strong performance from TRAC division * revenues of c. £3m from two businesses acquired in October 2005 for cash consideration of £321k * management of Cape changed and costs significantly reduced Commenting on the interim results, John Salkeld, Chairman of BIOQUELL PLC said: "I am delighted that the Group has moved into profit and for the first timeBIOQUELL's financial results are just beginning to reflect the significantinvestment and exciting developments which have been made over recent years. Thestrong growth in the bio-decontamination equipment and service revenues is areflection of BIOQUELL's growing international standing in this large market. Iam also pleased that more hospitals around the world are beginning to askBIOQUELL for help to combat problems relating to "superbugs". The robustperformance from the newly formed TRAC division is also excellent news forshareholders. We look forward to further progress in the second half." Enquiries John Salkeld BIOQUELL PLC 01264 835 900Nick AdamsMark Bodeker Emma Kane Redleaf Communications 020 7822 0200Sam Robbins CHAIRMAN'S STATEMENT BIOQUELL PLC - interim results for the six months ended 30 June, 2006 Overview The BIOQUELL Group comprises two divisions: Bio-decontamination and TRAC -Testing, Regulatory and Compliance - which includes Cape and the new servicebusinesses, TRL Compliance and KTL, acquired in October 2005. Results and finance Revenues for the Group increased by 74% to £12.2 million (H1 2005: £7.0million). Excluding the two businesses acquired in October 2005, the Group'srevenues showed organic growth of 33%. The Bio-decontamination division postedrevenues of £6.9 million (H1 2005: £4.7 million), representing organic growth of47%. The TRAC division posted revenues of £5.2 million (H1 2005: £2.3 million),representing growth of 126%; growth excluding the effect of acquisitions was 5%. Growth within the Bio-decontamination division principally related to theincrease of international and domestic sales of bio-decontamination equipmentand services as well as increased revenues from specialist environmental controlsystems for defence applications. Revenues from the laboratory equipment andafter-sales service businesses were broadly flat. Gross margins in the divisionalso increased, reflecting the higher proportion of sales of specialist, patentprotected equipment and services where the Group has unique expertise and agrowing international reputation. Demand for the specialist testing, regulatory and compliance services from theTRAC division were strong in the period, particularly in the defence, aerospaceand telecoms sectors. The integration of the businesses into one division iscontinuing and we believe that there are good opportunities to generate furtherrevenues from the businesses' existing clients as well as new clients. The grossmargins in the TRAC division were broadly stable. Gross expenditure on product development in the period was £0.6 million (H12005: £0.6 million). This reflected high levels of expenditure on the new woundhealing technology being developed by the Group. It also related to thecontinuing extension of the Clarus range of bio-decontamination equipment andongoing research into the eradication of "superbugs" from the hospitalenvironment. Sales and marketing costs remained stable at £1.5 million (H1 2005: £1.5million) notwithstanding continuing high levels of expenditure in the US as wellas the sales and marketing costs associated with the new businesses acquired inOctober 2005. Profit before tax was £0.4 million (H1 2005: loss before tax of £0.7 million).The £1.1 million improvement in profitability reflected a combination of factorsincluding higher revenues, increased gross margin, lower costs at the Andoverfacilities and a full half year's contribution from the newly acquiredbusinesses in the TRAC division which are currently important contributors tothe Group's profitability. The Group does not expect to incur a tax charge in the year, principally due tothe use of tax allowances relating to capital expenditure and research anddevelopment costs. The Group's net debt at 30 June, 2006 was unchanged from 31 December 2005 at£1.6 million despite significant demand for additional working capital from the74% increase in revenues. Capital expenditure was £0.6 million (H1 2005: £0.5 million) relatingprincipally to investment in specialist testing equipment for the TRAC division.Depreciation of property, plant and equipment was £0.5 million (H1 2005: £0.4million); amortisation of intangibles was £0.3 million (H1 2005: £0.2 million).Cash inflow after expenditure on product development and before capitalinvestment and acquisitions was £0.9 million (H1 2005: £0.8 million).Net assets at 30 June 2006 were £10.6 million (31 December 2005: £10.1 million). Bio-decontamination division BIOQUELL continues to develop its leading international reputation forspecialist bio-decontamination equipment and services. This is beginning to beseen in consistently higher levels of orders from clients located outside theUK, including those originated by the Group's sales offices in the United Statesand France. The Clarus product range is being extended and BIOQUELL will shortlybe able to offer better and faster bio-decontamination solutions to clients. Atthe same time the problems and costs associated with bacteria, viruses and fungicontinue to increase, often in a high profile manner, across a broad range ofsectors. We continue to focus significant resources on optimising the use of BIOQUELL'stechnology to eradicate "superbugs" from hospitals. This includes ongoingresearch in the US and the UK. Due to heightened press interest in "superbugs"and increasing concerns over litigation, most hospitals are understandablyreticent about seeking external help when faced with an endemic or outbreak"superbug" problem. Accordingly BIOQUELL has adopted a discreet and highlyprofessional approach to marketing its bio-decontamination services which isbeginning to pay off with increased levels of enquiries and orders. In the US, BIOQUELL has had an implant team (which comprises BIOQUELLtechnicians and proprietary equipment) permanently on site to combat "superbugs"at a US hospital for some 15 months and which has achieved a significantreduction in Clostridium difficile ("C.difficile") infections. Discussions areongoing to extend the contract for a further year. BIOQUELL is also indiscussions with a small number of other hospitals about deploying its"superbug" eradication services. Although the US represents a large potentialmarket we believe that it may take some time to achieve high levels of adoptionof BIOQUELL's implant technology in the US healthcare market. In July 2006 the Healthcare Commission published a report on two outbreaks of C.difficile at Stoke Mandeville Hospital in the UK where we assisted in bringingthe outbreak under control. As well as commenting favourably on the use of ourtechnology, this report stated more generally, among other things, that: "The achievement of the Government's targets was seen as more important than themanagement of the clinical risk inherent in the outbreaks of C. difficile. Thiswas a significant failing."; and "It is our conclusion that the approach taken by the trust compromised thecontrol of infection and hence the safety of patients. This was a significantfailing, and we would re-iterate to NHS boards that the safety of patients isnot to be compromised under any circumstances." Since the publication of this report there has been an increased level ofenquiries and orders from UK hospitals relating to BIOQUELL's technology toeradicate "superbugs". We are also seeing increased interest and demand fromhospitals in continental Europe for BIOQUELL's "superbug" outbreak eradicationservice. Over recent years BIOQUELL has significantly upgraded its CBRN (chemical,biological, radiological and nuclear) weapons filtration systems and relatedenvironmental control technology for the defence sector. We are now beginning tosee increased levels of demand, including from US vehicle manufacturers. Giventhe problems in the Middle East and Afghanistan, we anticipate that higherlevels of demand for the Group's specialist CBRN filtration systems willcontinue for some time. The Group continues to invest significant time and resources in its new woundhealing technology to carry out the necessary research and development to bringit to market. A further set of clinical trials designed to determinescientifically the primary mode of action of the technology is planned to startnext month. Later in the year we expect to start a large multi-centre randomisedcontrolled trial to obtain statistically significant data - which will becritical for certain regulatory filings as well as to convince healthcareproviders of efficacy. Discussions with the relevant regulatory authorities areongoing and the application for UK approval is still expected to be made laterthis year. TRAC division Trading in the TRAC (Test, Regulatory and Compliance) division has becomestronger during the year. Revenues at Cape (environmental testing) were broadlyflat in the period but strong growth in revenues and profitability was seen atTRL Compliance and EMC Projects (electromagnetic compatibility testing) as wellas at KTL (specialist telecoms testing). Trading at KTL Inc, based in SiliconValley in California, has been slightly behind our expectations; however, we arenow beginning to see higher levels of activity in the US and are confident offurther growth in the second half. We are investing in specialist equipment to extend the services which the TRACdivision businesses can provide, including lightning tests for the aerospacesector and VoIP (voice over internet protocol). We are also monitoring closelythe significant investments in WiMax (long-range wireless based broad bandtechnology) being announced by large US telecoms groups and intend to investwhen appropriate in testing equipment. We are in the process of moving and consolidating a number of the sitescurrently used by TRL Compliance. The costs of these moves have already beenfully provided for and once completed will give TRL Compliance significantlymore efficient and better equipped facilities to provide high value services toits clients. The senior management team at Cape has been changed and at the same time we havereduced the cost base of Cape significantly. The benefits of these savingsshould start to be seen in the second half. Prospects We are delighted that the Group has moved into profit and current tradingremains at encouraging levels. We expect improving levels of demand for theGroup's bio-decontamination equipment and services - and believe demand islikely to increase from hospitals, particularly for the eradication of"superbugs". The development of the wound healing technology remains on trackand the potential size of this market is substantial. We also expect the robusttrading performance from the TRAC division to continue. In short, the Group'sprospects are good. John SalkeldChairman19 September, 2006 Consolidated income statement unaudited interim results for the six months ended 30 June 2006 ---------- ---------- ----------- 6 months 6 months 12 months to 30 June to 30 June to 31 December 2006 2005 2005 £'000 £'000 £'000 ---------- ---------- -----------Revenue 12,171 6,996 17,220Cost of sales (7,593) (4,638) (10,925) ---------- ---------- -----------Gross profit 4,578 2,358 6,295 38% 34% 37% ---------- ---------- -----------Operating expenses: (1,469) (1,492) (3,118)Sales & marketing costs ---------- ---------- -----------Administration costs before sharebased payments (1,757) (1,107) (2,608)Share based payments (118) (101) (196) ---------- ---------- -----------Administration costs (1,875) (1,208) (2,804)R&D and Engineering costs (790) (353) (767) ---------- ---------- -----------Profit / (loss) from operations 444 (695) (394) ---------- ---------- -----------Finance costs (74) (43) (107) ---------- ---------- -----------Profit / (loss) before tax 370 (738) (501)Tax credit on profit/(loss) onordinary activities - 78 177 ---------- ---------- -----------Profit/(loss) for the periodattributable to equity holders ofthe parent 370 (660) (324) ---------- ---------- -----------Earnings/(loss) per share - basicand diluted 0.9p (1.6p) (0.8p) ---------- ---------- ----------- All amounts are derived from continuing operations. Notes: 1. The financial information for the six months ended 30 June 2006 and thecomparative figures for the six months ended 30 June 2005 have not been reviewedor audited by the Group's auditors and have been prepared on the basis of theaccounting policies adopted by the Group under IFRS. The same accountingpolicies and methods of computation are followed in the interim financial reportas published by the Company on 11 April 2006 in its annual financial statements,which are available on the Company's website on www.bioquellplc.com. 2. The comparative figures for the 12 months to 31 December 2005 have beenprepared under IFRS. They do not constitute statutory accounts within themeaning of section 240 of the Companies Act 1985. The unqualified auditedaccounts for the 12 months ended 31 December 2005 have been filed with theRegistrar of Companies and they did not contain statements under section 237(2)or (3) of the Companies Act 1985. 3. Tax credits shown on the Income Statements for 2005 relate to Researchand Development costs. 4. Earnings/(loss) per share for the half-year has been calculated on theearning/(loss) on ordinary activities after taxation, after deducting dividends on non-equity (preference) shares due but not paid, divided by the weighted average number of ordinary shares in issue during the period. The Group's basic and fully diluted earnings per share are equal. 5. The report was approved by the Board on 19 September 2006. 6. Copies of this statement will be available to members of the public atthe Company's registered office: 34A Walworth Road, Andover, Hampshire SP10 5PYand on the Group's website at www.bioquellplc.com Consolidated statement of recognised income and expense 6 months 6 months 12 months to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 --------- --------- ----------- Net profit/(loss) for theperiod 370 (660) (324) Actuarial loss on definedbenefit pension scheme - - (57) Exchange differences on thetranslation of foreignoperations (89) (31) 105 Prior year adjustment - (186) (186) --------- --------- ----------- Total recognised income/expense since last annual report 281 (877) (462) --------- --------- ----------- Consolidated balance sheet 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 --------- --------- -----------Non-current assetsGoodwill 665 333 665Other intangible assets 5,816 4,903 5,666Property, plant & equipment 3,236 2,890 3,263 --------- --------- ----------- 9,717 8,126 9,594 --------- --------- -----------Current assetsInventories 1,872 2,534 2,147Trade and other receivables 5,967 3,487 5,573Deferred tax 55 55 55Cash and cash equivalents - - 113 --------- --------- ----------- 7,894 6,076 7,888 --------- --------- -----------Total assets 17,611 14,202 17,482 --------- --------- ----------- Current liabilities (4,137) (3,514) (4,451)Trade and other payables (103) - (30)Obligations under finance leases (922) (355) (1,189)Bank overdraft (924) - (820)Provisions --------- --------- -----------Net current assets 1,808 2,207 1,398 --------- --------- ----------- Total non-current liabilities (918) (807) (847) --------- --------- ----------- Total liabilities (7,004) (4,676) (7,337) --------- --------- -----------Net assets 10,607 9,526 10,145 --------- --------- ----------- EquityShare capital 4,053 4,018 4,032Share premium account 10,435 10,298 10,393Equity reserve 483 270 365Capital reserve 255 255 255Translation reserve (120) (167) (31)Retained earnings (4,499) (5,148) (4,869) --------- --------- -----------Equity attributable to equity holders of the parent 10,607 9,526 10,145 --------- --------- ----------- Consolidated cash flow statement six months ended 30 June 2006 ----------- ----------- ------------ 6 months to 6 months to 12 months to 31 30 June 2006 30 June 2005 December 2005 £ 000 £ 000 £ 000 ----------- ----------- ------------Net cash fromoperating activities 852 816 1,691 ----------- ----------- ------------Investing activities Proceeds ondisposal of property, plant & equipment 78 - 46 Purchases of property, plant & equipment (551) (479) (1,192) Expenditure onproduct development (432) (537) (1,182) Acquisition of asubsidiary - - (364) ----------- ----------- ------------Net cash used ininvestingactivities (905) (1,016) (2,692) ----------- ----------- ------------ Financing activities Proceeds on issueof ordinary shares 63 15 124 Repayment of borrowings - (14) (25) Obligations underfinance leases 144 (17) (35) ----------- ----------- ------------Net cash from/(used in)financing activities 207 (16) 64 ----------- ----------- ------------ ----------- ----------- ------------Decrease/(increase) in bank overdraft 154 (216) (937) ----------- ----------- ------------Bank (overdraft) /cash at beginning of year (1,076) (139) (139) Bank (overdraft) /cash at end of year (922) (355) (1,076) ----------- ----------- ------------ Note to the cash flow statement ----------- ----------- ------------ 6 months to 6 months to 12 months to 30 June 2006 30 June 2005 31 December 2005 £ 000 £ 000 £ 000 ----------- ----------- ------------Operatingprofit/(loss) 444 (695) (394) ----------- ----------- ------------Adjustments for: Depreciation of property,plant & equipment 509 438 950 Amortisation ofintangible assets 282 204 442 Share based payments 118 101 196 Gain on disposal offixed assets (9) - (16) Increase/(decrease)in provisions 104 (9) (124) ----------- ----------- ------------Operating cashflowsbefore movements inworking capital 1,448 39 1,054 ----------- ----------- ------------Decrease/(increase) in inventories 275 (186) 201 (Increase)/decrease inreceivables (483) 1,152 (854) (Decrease)/increase inpayables (314) (146) 1,390 ----------- ----------- ------------Cash generatedby operations 926 859 1,791 ----------- ----------- ------------Non-equitypreference sharedividends paid (6) (6) (11)Interest paid (68) (37) (89) ----------- ----------- ------------Net cash fromoperating activities 852 816 1,691 ----------- ----------- ------------ Business segments For management purposes the Group is currently organised into two operatingdivisions - 'Bio-decontamination Solutions' and 'Testing Regulatory andCompliance'. These divisions are the basis on which the Group reports itsprimary segment information. Segment information about these businesses is presented below. Six months ended 30 June 2006 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue 6,931 5,240 12,171Result Segment result 168 678 846 ----------- ----------- -----------Head office costs (402) -----------Profit from operations 444 -----------Finance costs (74) -----------Profit before tax 370 ----------- Revenue Geographically (Market)UK 3,496 4,892 8,388EU 1,270 99 1,369ROW 2,165 249 2,414 ----------- ----------- ----------- 6,931 5,240 12,171 ----------- ----------- ----------- Six months ended 30 June 2005 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue 4,707 2,289 6,996Result Segment result (518) 238 (280) ----------- ----------- -----------Head office costs (415) -----------Loss from operations (695) -----------Finance costs (43) -----------Loss before tax (738) ----------- Revenue Geographically (Market)UK 2,417 2,289 4,706EU 736 - 736ROW 1,554 - 1,554 ----------- ----------- ----------- 4,707 2,289 6,996 ----------- ----------- ----------- Year ended 31 December 2005 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue Result 11,483 5,737 17,220 Segment result (309) 795 486 ----------- ----------- -----------Head office costs (880) -----------Loss from operations (394) -----------Finance costs (107) -----------Loss before tax (501) ----------- Revenue Geographically (Market)UK 5,376 5,351 10,727EU 2,460 60 2,520ROW 3,647 326 3,973 ----------- ----------- ----------- 11,483 5,737 17,220 ----------- ----------- ----------- This information is provided by RNS The company news service from the London Stock Exchange